Hersha Hospitality Trust Annual Report 2014

FY2014 Annual Report · Hersha Hospitality Trust
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HERSHA

hersha hospitality trust

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www.hersha.com

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2014 financial highlights

(In thousands, except per share data) 

consolidated hotel
operating results

2014

2013

2012

2011

2010

Year Ended December 31,

hotel operating revenues

average daily rate
occupancy
revenue per available room

$

$

$

417,226

338,064

299,005

229,156

184,998

187.82
82.6%
155.19

179.70
79.7%
143.30

175.23
78.6%
137.78

166.58
76.6%
127.64

157.11
76.7%
120.52

(In thousands, except per share data) 

hersha hospitality trust
operating data: (Excluding Impairment Charges) (1)

2014

2013

Year Ended December 31,

2012

2011

2010

$
Total Revenues (Including Discontinued Operations)                    
Net Income applicable to Common Shareholders
Adjusted EBITDA(2) (4)
Adjusted Funds from Operations (3) (4)

419,346 
54,638
162,506
102,832

396,458 
44,467
145,064
86,487

364,690 
8,376
143,291
76,046

329,868 
)
(5,133
132,969
68,710

283,597 
)
(18,871
108,329
52,067

per share data: (Excluding Impairment Charges) (1)
$
Basic/Diluted Earnings Per Common Share
AFFO
Distributions to Common Shareholders

0.27
0.49
0.26

0.22
0.41
0.24

0.04
0.38
0.24

)

(0.03
0.38
0.23

)

(0.14
0.36
0.20

balance sheet data: (as of December 31st)
Total Assets 
Total Debt 
Noncontrolling Interest in Partnership
Total Shareholder’s Equity

$

1,855,539
918,923
28,007
829,382

1,748,097
819,336
29,181
837,958

1,707,679
792,708
31,281
829,828

1,630,909
820,132
32,124
730,671

1,457,277
694,720
39,778
683,434

(1) Operating and Per Share Data exclude charges recorded during 2010-2014 relating to impairment losses on investment in unconsolidated joint ventures and assets
held for sale.

(2) Adjusted Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA) is a non-GAAP financial measure within the meaning of the Securities and
Exchange Commission rules. Our interpretation of Adjusted EBITDA is that EBITDA derived from our investment in unconsolidated joint ventures should be added back to
net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. Our Adjusted EBITDA computation may not be comparable to EBITDA or Adjusted EBITDA 
reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT's
performance because it is widely followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, net income,
cash flow, FFO and AFFO as a measure of the company's operating performance.

(3) Funds from Operations (FFO) as defined by NAREIT represents net income (loss) (computed in accordance with generally accepted accounting principles), excluding
extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated assets, plus certain non-cash items, such as loss from impairment of
assets and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  We present Adjusted Funds From Operations (AFFO),
which reflects FFO in accordance with the NAREIT definition plus the following additional adjustments: adding back write-offs of deferred financing costs on debt
extinguishment, both for consolidated and unconsolidated properties, adding back amortization of deferred financing costs, adding back non-cash stock expense, adding
back acquisition and terminated transaction expenses, adding back preferred share extinguishment costs, adding back prior period tax assessment expenses, adding back
FFO attributed to our partners in consolidated joint ventures, and making adjustments to ground lease payments, which are required by GAAP to be amortized on a
straight-line basis over the term of the lease, to reflect the actual lease payment. 

(4) In these financial highlights and in the Letter to Shareholders from our Chief Executive Officer and our President and Chief Operating Officer that follows, we present
non-GAAP financial measures, including EBITDA, Adjusted EBITDA, hotel EBITDA, FFO and AFFO.  We have provided reconciliations of these non-GAAP financial measures to
the applicable GAAP measures in the appendix section that follows the letter to our shareholders, in portions of our Annual Report on Form 10-K for the year ended 
December 31, 2014, which accompanies this Letter or can be viewed at www.hersha.com, under “Item 7 Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” Because hotel EBITDA is specific to individual hotels or groups of hotels and not to our Company as a whole, it is not directly comparable to any
GAAP measure and should not be relied on as a measure of performance for our portfolio of hotels taken as a whole.

HERSHA

hersha hospitality trust

Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns
and operates high quality upscale hotels in urban gateway markets. The Company's 51 hotels totaling 8,259 rooms
are located in New York, Boston, Philadelphia, Washington, DC, Miami and select markets on the West Coast.  

Hersha Hospitality Trust shares are traded on The New York Stock Exchange under the ticker “HT”.

(1)
hersha total returns since ipo in 1999

338%
A
H
S
R
E
H

272%

255% 251%

209% 190% 176%

154%

125%

68%

R M Z  

I n d e x
B e r k s h i

r e   H a t h a w a y
s n e y   C o m p a n y
I n d e x
  2 0 0 0  
S N L   U S   H o t e l
s e l
  D i
R u s
t
W a l

l

  R E I T  

I n d e x

D o w  

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W a l

- M a r

  S t o r e s

S & P   5 0 0  

t

hersha portfolio by location

(2)

I n d e x

N A R E I T  

I n d e x
G e n e r a l

16%

-54%

r

i c
  E l e c t
F o r d   M o t o r

  C o m p a n y

New York City 36%

California 15%

Washington, DC 14%

South Florida 12%

Boston 10%

Philadelphia 10%

hersha portfolio by market segment

(3)

hersha portfolio by hotel brand

(3)

Upscale 46%

Upper Midscale 44%

Luxury/Upper Upscale 10%

Marriott 27%

Hilton 24%

Intercontinental 20%

Hyatt 13%

Independent 13%

Other 3%

(1) Source: Bloomberg and SNL Financial. Total Returns from January 26, 1999 through December 31, 2014. Assumes dividends are reinvested.     
(2) Reflects portfolio concentration by room count for consolidated operations.
(3) Reflects portfolio EBITDA concentration for consolidated operations. 

annual report 2014

hersha hospitality trust

Fellow Shareholders

Last year marked our 15th year as a publicly traded real estate investment trust.  Since listing in 1999, we have delivered a 338% total

return to our shareholders, outperforming most of the market’s relevant benchmarks.  Our hotel investment strategy of owning urban

transient hotels in high barrier to entry, global gateway markets in the United States is unique in the sector.  The hotels that we buy

produce above market cash ﬂows and real estate value appreciation.  The strategy is total return focused, with the resiliency that comes

with the high margins we produce.  Today we own over 50 hotels in the best markets in the country. The positive economic fundamentals

in our markets, and the unique combination of premium room rates and eﬃcient operating models at our hotels, position us for several

more years of outsized earnings growth.   Our skilled senior management team, which has led the Company since its IPO and successfully

navigated 3 lodging cycles, is focused on driving internal growth with value-added asset and revenue management strategies.  Our external

growth emanates from a disciplined acquisitions program, with emphasis on buying hotels accretive to our already impressive operating

and earnings metrics.  Last year, we generated a 31% return to shareholders, meaningfully higher than the S&P 500’s 14% return and the

Dow Jones Industrial Average’s 10% return. 

Urbanization

 
Digitization

 
annual report 2014

Portfolio Performance

The positive macroeconomic environment, recovering group business, and the continued growth of international visitation to the United

States drove a rare mid-cycle re-acceleration of Revenue per Available Room (RevPAR) growth.  Full-year 2014 RevPAR in the United

States increased 8.3%, compared to 5.4% growth in 2013.  Since 1987, the industry has recorded only 3 years of 8% or stronger growth,

with each of those years occurring earlier in their respective cycles.  The Average Daily Rate (ADR) in the United States increased 4.6%

driven by robust transient demand, while full-year 2014 Occupancy increased 220 basis points to 64.4%.  While 2014 was the sixth year

of a typical 5-to-9-year lodging cycle, the United States lodging sector remains squarely in the ‘middle-innings’ of what most experts

believe to be a prolonged cycle.  

hersha hospitality trust

Industry fundamentals played out better than expected in 2014, with low supply growth and an acceleration of room night demand

driving revenue performance.  Total hotel demand was 12.6% above the last cycle’s peak and the highest recorded in U.S. history.  Group

dynamics also improved in 2014, with increased group room demand creating compression in our markets that beneﬁted pricing power

at our transient hotels.

International inbound travel grew briskly last year despite the strengthening U.S. dollar.  In 2014, international visitation increased 7%

compared to 2013, with Hersha’s geographic footprint uniquely positioned to capture a greater share of inbound international travelers

vis-à-vis peers, as our gateway markets welcomed approximately 59% of total international overseas visitors in 2014. 

Our portfolio achieved record high RevPAR of $155 last year representing an increase of 8.3% compared to 2013.  Portfolio ADR rose

4.5% to $188, while average hotel occupancy increased 3% to a robust 83%.  Growth from higher room rates, ramp-up and stabilization

of new hotels, limited disruption from renovations, and the addition of our development projects in Miami Beach and Manhattan

produced impressive EBITDA growth. In 2014, hotel EBITDA reached $157.4 million, increasing 26.4% compared to 2013, while hotel

EBITDA margins expanded to a sector leading 37.7%.  

annual report 2014

Investment Discipline

During 2014, we bought 4 strategic hotels in California, South Florida and Manhattan. In March, we closed on the purchase of the Hotel

Milo in Santa Barbara for approximately $42.0 million. This popular oceanfront hotel is an attractive addition to Hersha’s West Coast

portfolio.  The Santa Barbara hotel market is one of the highest RevPAR markets in the country with minimal new supply, making the

future outlook there strong.  The Hotel Milo is already producing attractive returns generating an 8.2% cash ﬂow yield by the end of the

year.

We also purchased the 148-room Parrot Key Hotel & Resort in Key West, Florida in May for $100.0 million.  The hotel is one of the most

recently built waterfront hotels on the Key, with some of the largest rooms and the most oceanfront suites in Key West. The government-

imposed ordinance limiting new hotel supply and consistent year-round demand make Key West a very desirable hotel investment market.

hersha hospitality trust

Parrot Key has exceeded our underwriting expectations producing an 8.3% yield on cost by the end of 2014, and is expected to generate

$4.2 million of incremental EBITDA in 2015.  Last year, our West Coast and South Florida portfolio contributed 25% of our EBITDA 

compared to 5% at the beginning of this cycle. 

Later in May, we opened the brand new 205-room Hilton Garden Inn Midtown East on 52nd Street oﬀ of 3rd Avenue in Manhattan.  The

hotel is ideally located in a corporate oﬃce market of approximately 20 million square feet.   It is proximate to the United Nations, Grand

Central Station and Rockefeller Center, and is only the second new hotel to be constructed in Midtown East in 15 years.  Within its ﬁrst

year of operation, the hotel’s market value has reached $125.0 million, a $40.0 million gain to the Company.

In June, we opened the brand new 81-room Hampton Inn Downtown Financial District located just a block and a half from Battery Park

and the Ellis Island Ferry.  The hotel is the Company’s 4th in the Financial District, a submarket that will beneﬁt from 10 million square

feet of brand new, world-class oﬃce space, which is expected to drive signiﬁcant transient room night demand moving forward. Ramp-

up at the hotel is strong with the hotel expected to achieve ﬁrst-year ADR of $241 at 88% occupancy.  Both hotels add to the quality and

real estate value of our New York City portfolio and have been immediately accretive to earnings.   The delivery of the Hilton Garden Inn

Midtown East and the Hampton Inn Downtown Financial District also mark the successful conclusion of the Company’s construction and

development pipeline.

Optimization

 
Globalization

 
annual report 2014

While adding high-quality hotels to the portfolio, we also sold a number of stabilized, select service assets in suburban markets and one in

the New York City market, monetizing gains and recycling the capital into new investments.   During February 2014, the Company closed on

the sale of the remaining 4 hotels of our non-core portfolio.  Additionally in New York City, we sold the 70-room Hotel 373 in April to an

oﬀshore investment group for $37.0 million, realizing a gain of $7.2 million.

We further enhanced portfolio value by executing on timely renovation projects that are generating returns now and will continue to drive

outperformance in the coming years.  In 2014, we completed work at The Rittenhouse Spa, Club, Salon and Pool in Philadelphia, completing

the ﬁnal element of renovations at the iconic luxury urban resort. Signiﬁcant renovations were also completed at some of our hotels in Boston,

Los Angeles, Washington D.C. and South Florida.  These properties are enjoying improved performance and enhanced market positioning as

a result of the renovations.  At present, all of our signiﬁcant renovation projects are complete. With 70% of the portfolio fully renovated in

the past 3 years, our hotels are well-positioned to leverage incremental earnings at a time in the cycle when proﬁt potential is at its highest.

hersha hospitality trust

Capital Management

We are ﬁrmly committed to a balance sheet strategy that is both secure and ﬂexible, and provides us with economic advantages.  In the

competitive transactions market, our ﬁnancial strength allows us to capitalize on investment opportunities by oﬀering agility and mitigating

execution risk for sellers.  In early 2014, we closed on a new, attractively priced $500.0 million credit facility, consisting of a $250.0 million

senior unsecured revolving line of credit and a $250.0 million senior unsecured term loan.  In addition to meaningful ﬂexibility, the facility

provides extended debt maturities and a reduced weighted average cost of debt. 

In addition, during the ﬁrst quarter 2014, we repurchased approximately 2.6 million of our own shares for $15.2 million at a weighted

average cost of $5.80 per share. We believe opportunistic share buybacks are an attractive use of available capital and a driver of share

value when the share price is temporarily dislocated and at a material discount to the Company’s net asset value.  

At our Board of Trustees Meeting in September of last year, the Trustees voted to increase the quarterly cash dividend by 16.7% to $0.07

per share, representing an annualized dividend of $0.28 per share, a 4% dividend yield at year-end.  In addition to being consistent with

our total return focus, our increased common dividend reﬂects growing cash ﬂow and the sound ﬁnancial health of the marketplace.

As we have detailed, the completion of our ground-up development projects and the majority of our large-scale renovation projects

undertaken in the early part of the recovery has the Company well-positioned to harvest cash ﬂow, leverage rate driven revenue growth

and return capital to our shareholders. 

annual report 2014

The Company’s goal during this cycle is to remain nimble to quickly respond to any opportunities or changes within the market.  The

various corporate ﬁnance actions that took place in 2014 are supportive of this goal.

Conﬁdence is Preparation

Our range of accomplishments in 2014 demonstrate our long-term value creation approach that has led to the Company’s meaningful

total return outperformance across the last 15 years.  Our clear path for earnings and value growth is more apparent than at any point

in our years as a public company. 

hersha hospitality trust

As we move into 2015 and beyond, we will seek growth in markets that we understand well and where we can leverage our diﬀerentiated

investment philosophy.  Last year’s strategic acquisitions, the delivery of the development pipeline and the results of our capital recycling,

uniquely position the Company for earnings and share price outperformance. 

Our cash ﬂow generation, driven by our urban transient hotel strategy in the country’s top gateway markets, the operational advantages

the Company brings and our collaborative management structure is expected to accelerate through the cycle, further driving value for

shareholders. In the coming year, we will continue to execute on our strategy, while simultaneously remaining agile and responsive to

evolving market conditions.  We are grateful for your continued trust and support for our thoughtful, absolute return approach, and we

look forward to updating you across the year on our progress.

jay h. shah

chief executive officer

neil h. shah

president and 

chief operating officer

Organization

 
®

Hersha  Hospitality  Trust  embraces  environmental  and  community

stewardship as an integral part of maintaining and building a successful

business. For that reason, we created and branded the EarthView®

program in 2010 with a cross-functional team from our properties and

our corporate oﬃces. 

Through  EarthView,  we  deliver  environmental  and  conservation

programs  that  positively 

impact  a  hotel  operation's  ﬁnancial

performance  while  simultaneously  improving  the  well-being  of  our

guests, our associates, our communities, and our planet. 

new cadillac courtyard
miami beach tower 
is leed certified

The new 93 room tower built at the Cadillac

Courtyard Miami Beach is now a LEED Certiﬁed 

addition to the hotel. As built, the tower will 

reduce energy use by 15% and water use by 

30% as compared to similar hotels.

Sustainability

Our  approach  to  sustainability 

is

thoughtful and pragmatic, meaning we

apply a rigorous analytical methodology

to measure our ﬁnancial impact, as well

as  our  environmental  and  community

impact.    We  are  pleased  with  our

results and EarthView’s recognition as

an award winning program, distinguished

by its innovative and strong commitment

to sustainability practices.

Initiatives implemented as a part of the

EarthView  program  are  designed  to

achieve a positive cumulative ﬁnancial

return. To date, these initiatives have

resulted in net savings of approximately

$3.2 million since the inception of the

program.

capturing sunshine 
in the sunshine state

Hersha recently installed 336 Solar PV panels on the roof of its Residence Inn by Marriott
Coconut Grove property in Florida. The system captures renewable energy from the sun

and will generate over 150,000 kWh of electricity each year for use by the hotel.

 
annual report 2014

Over the last two years, we have focused on capital initiatives to target reductions in utility expenses with clear and timely

returns on investment. For example, guestroom energy management systems began installation across our portfolio at the

end of 2013. These systems are able to reduce guestroom heating and cooling costs by 25-35%. With a capital cost of $2.1

Million and an annual savings in heating and cooling costs of roughly $1 Million, the payback period is just over 2 years.

As a triple bottom line program, EarthView also focuses on strengthening Hersha’s commitment to the communities our

properties operate in and fostering business practices that promote the public good. Within these eﬀorts, we embrace our

ongoing partnerships with various NGOs and Trade Organizations such as the United Way, the American Hotel & Lodging

Association Educational Foundation, Clean the World, and most recently, Water.org.

hersha hospitality trust
hersha hospitality trust

financial impact

community engagement

$3.2 million

2,600 hours

EarthView’s recorded savings since inception from

Hours volunteered by all of our associates.  Over 14,000

energy initiatives implemented across our portfolio.

hours since the start of the program.

environmental performance

Local and global organizations supported by EarthView’s

215 organizations supported

13% carbon reduction

Reduced energy consumption across our portfolio

resulted in a decrease in carbon emissions per

philanthropic initiatives.

23,000 pounds of soap donated

Pounds of soap donated to Clean the World, creating

occupied room versus our baseline year of 2010.

63,000 new bars sent to developing nations.

8% water reduction

clean water projects supported

Reduced water consumption across our portfolio

Support for clean water projects around the world

versus our baseline year of 2010.

42% waste reduction

Reduced waste sent to landﬁlls across our portfolio

versus our baseline year of 2010.

through the EarthView water initiative, which donates $1

for every 1 bottle of EarthView branded water sold.

annual report 2014

new york city

philadelphia

Hyatt Union Square, Greenwich Village
Duane Street Hotel, Tribeca
NU Hotel, Brooklyn
Hilton Garden Inn, Midtown East
Hilton Garden Inn, Tribeca
Hampton Inn Manhattan/Times Square
Hampton Inn, Madison Square Garden
Hampton Inn, Chelsea
Hampton Inn, Seaport
Hampton Inn Downtown Financial District
Holiday Inn, Wall Street
Holiday Inn Express, Water Street
Holiday Inn Express, Times Square South
Holiday Inn Express, Madison Square Garden
Candlewood Suites, Times Square South

The Rittenhouse, Center City Philadelphia
Hampton Inn, Center City/Convention Center
Hyatt Place, King of Prussia/Valley Forge
Sheraton Wilmington South, Wilmington, DE

washington, d.c.

Hampton Inn, Washington, D.C.
Capitol Hill Hotel, Washington, D.C.
Residence Inn by Marriott, Tyson’s Corner, VA
Courtyard by Marriott, Alexandria, VA
Residence Inn by Marriott, Greenbelt, MD
Hyatt House, Gaithersburg, MD

hersha hospitality trust properties

miami

Cadillac Courtyard Miami Beach Oceanfront, Miami Beach
Blue Moon Hotel, Miami Beach
Winter Haven, Miami Beach
Residence Inn by Marriott Coconut Grove, Miami
Parrot Key Hotel & Resort, Key West

west coast

Hotel Milo, Santa Barbara
Courtyard by Marriott Westside, Los Angeles
Courtyard by Marriott, Downtown San Diego
Hyatt House, Pleasant Hill/Walnut Creek
Hyatt House, Pleasanton/Dublin
Hyatt House, Scottsdale, AZ

Sheraton Hotel, JFK International Airport
Hilton Garden Inn, JFK International Airport
Hyatt House, White Plains
Holiday Inn Express, Chester

boston

The Boxer, Boston
Courtyard by Marriott, Boston/Brookline
Courtyard by Marriott, South Boston
Holiday Inn Express, Cambridge
Holiday Inn Express, South Boston
Residence Inn by Marriott, Framingham
Residence Inn by Marriott, Norwood
Hawthorn Suites, Franklin

connecticut

Marriott Downtown, Hartford
Hilton Hotel, Hartford
Mystic Marriott Hotel and Spa, Mystic/Groton

Information contained in this Annual Report supercedes the information filed
in Hersha Hospitality Trust’s 10-K filed on February 20, 2015.

Please see our website for the definition and reconciliation of our historical
non-GAAP financial measures.

section

part i

item 

1. 

item  2. 
part ii

item  5.

item  6.

item  7.

item  7a.

item  8.

item  9.

item  9a.

consolidated financial statements

index

Business
Properties

Market for Registrant's Common Equity, Related Stockholder Matters and 
Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results

of Operations
Quantitative and Qualitative Disclosures About Mark Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures

HERSHA

hersha hospitality trust

page

2
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9

12
14 

34
35
92

92

The Annual Report contains excerpts from our Annual Report on Form 10-K for the ﬁscal year ended December 31,

2014, and substantially conforms with the version ﬁled with the Securities and Exchange Commission (“SEC”).

However, the Form 10-K also contains additional information.  For a free copy of our Form 10-K, please contact:

Investor Relations
Hersha Hospitality Trust
44 Hersha Drive
Harrisburg, PA 17102

Our Form 10-K and other ﬁlings with the SEC are also available on our website, www.hersha.com.  The most recent
certiﬁcations by our chief executive oﬃcer and chief ﬁnancial oﬃcer pursuant to the Sarbanes-Oxley Act of 2002
are ﬁled as exhibits to our Form 10-K.

 
annual report 2014 

Item	
  1.	
  

	
   Business	
  

OVERVIEW	
  

PART	
  I	
  

Hersha	
  Hospitality	
  Trust	
  is	
  a	
  self-‐advised	
  Maryland	
  real	
  estate	
  investment	
  trust	
  that	
  was	
  organized	
  in	
  1998	
  

and	
  completed	
  its	
  initial	
  public	
  offering	
  in	
  January	
  of	
  1999.	
  Our	
  common	
  shares	
  are	
  traded	
  on	
  the	
  New	
  York	
  Stock	
  
Exchange	
  under	
  the	
  symbol	
  “HT.”	
  We	
  invest	
  primarily	
  in	
  institutional	
  grade	
  hotels	
  in	
  major	
  urban	
  gateway	
  markets	
  
including	
  New	
  York,	
  Washington	
  DC,	
  Boston,	
  Philadelphia,	
  South	
  Florida	
  and	
  select	
  markets	
  on	
  the	
  West	
  Coast.	
  Our	
  
primary	
  strategy	
  is	
  to	
  continue	
  to	
  acquire	
  high	
  quality,	
  upscale,	
  mid-‐scale	
  and	
  extended-‐stay	
  hotels	
  in	
  metropolitan	
  
markets	
  with	
  high	
  barriers	
  to	
  entry	
  in	
  markets	
  with	
  similar	
  characteristics.	
  We	
  have	
  operated	
  and	
  intend	
  to	
  
continue	
  to	
  operate	
  so	
  as	
  to	
  qualify	
  as	
  a	
  REIT	
  for	
  federal	
  income	
  tax	
  purposes.	
  

We	
  seek	
  to	
  identify	
  acquisition	
  candidates	
  located	
  in	
  markets	
  with	
  economic,	
  demographic	
  and	
  supply	
  

dynamics	
  favorable	
  to	
  hotel	
  owners	
  and	
  operators.	
  Through	
  our	
  due	
  diligence	
  process,	
  we	
  select	
  those	
  acquisition	
  
targets	
  where	
  we	
  believe	
  selective	
  capital	
  improvements	
  and	
  intensive	
  management	
  will	
  increase	
  the	
  hotel’s	
  
ability	
  to	
  attract	
  key	
  demand	
  segments,	
  enhance	
  hotel	
  operations	
  and	
  increase	
  long-‐term	
  value.	
  

As	
  of	
  December	
  31,	
  2014,	
  our	
  portfolio	
  consisted	
  of	
  46	
  wholly	
  owned	
  limited	
  and	
  full	
  service	
  properties	
  

with	
  a	
  total	
  of	
  6,587	
  rooms	
  and	
  interests	
  in	
  five	
  limited	
  and	
  full	
  service	
  properties	
  owned	
  through	
  joint	
  venture	
  
investments	
  with	
  a	
  total	
  of	
  1,369	
  rooms.	
  These	
  51	
  properties,	
  with	
  a	
  total	
  of	
  7,956	
  rooms,	
  are	
  located	
  in	
  Arizona,	
  
California,	
  Connecticut,	
  Delaware,	
  District	
  of	
  Columbia,	
  Florida,	
  Maryland,	
  Massachusetts,	
  New	
  York,	
  Pennsylvania,	
  
and	
  Virginia	
  and	
  operate	
  under	
  leading	
  brands,	
  owned	
  by	
  Marriott	
  International,	
  Inc.	
  (“Marriott”),	
  Hilton	
  
Worldwide,	
  Inc.	
  (“Hilton”),	
  InterContinental	
  Hotels	
  Group	
  (“IHG”),	
  Hyatt	
  Corporation	
  (“Hyatt”),	
  or	
  Starwood	
  Hotels	
  
and	
  Resorts	
  Worldwide,	
  Inc.	
  (“Starwood”).	
  In	
  addition,	
  some	
  of	
  our	
  hotels	
  operate	
  as	
  independent	
  boutique	
  hotels.	
   	
  

We	
  are	
  structured	
  as	
  an	
  umbrella	
  partnership	
  REIT,	
  or	
  UPREIT,	
  and	
  we	
  own	
  our	
  hotels	
  and	
  our	
  

investments	
  in	
  joint	
  ventures	
  through	
  our	
  operating	
  partnership,	
  Hersha	
  Hospitality	
  Limited	
  Partnership,	
  for	
  which	
  
we	
  serve	
  as	
  general	
  partner.	
  As	
  of	
  December	
  31,	
  2014,	
  we	
  owned	
  an	
  approximate	
  95.8%	
  partnership	
  interest	
  in	
  our	
  
operating	
  partnership.	
  

The	
  majority	
  of	
  our	
  wholly-‐owned	
  hotels	
  are	
  managed	
  by	
  Hersha	
  Hospitality	
  Management,	
  L.P.	
  

(“HHMLP”),	
  a	
  privately	
  held,	
  qualified	
  management	
  company	
  owned	
  by	
  certain	
  of	
  our	
  trustees	
  and	
  executive	
  
officers	
  and	
  other	
  unaffiliated	
  third	
  party	
  investors.	
  Third	
  party	
  qualified	
  management	
  companies	
  manage	
  the	
  
hotels	
  that	
  we	
  own	
  through	
  joint	
  venture	
  interests.	
  We	
  lease	
  our	
  wholly-‐owned	
  hotels	
  to	
  44	
  New	
  England	
  
Management	
  Company	
  (“44	
  New	
  England”),	
  our	
  wholly-‐owned	
  taxable	
  REIT	
  subsidiary	
  (“TRS”).	
  Each	
  of	
  the	
  hotels	
  
that	
  we	
  own	
  through	
  a	
  joint	
  venture	
  investment	
  is	
  leased	
  to	
  another	
  TRS	
  that	
  is	
  owned	
  by	
  the	
  respective	
  joint	
  
venture	
  or	
  an	
  entity	
  owned	
  in	
  part	
  by	
  44	
  New	
  England.	
  

Our	
  principal	
  executive	
  office	
  is	
  located	
  at	
  44	
  Hersha	
  Drive,	
  Harrisburg,	
  Pennsylvania	
  17102.	
  Our	
  

telephone	
  number	
  is	
  (717)	
  236-‐4400.	
  Our	
  website	
  address	
  is	
  www.hersha.com.	
  The	
  information	
  found	
  on,	
  or	
  
otherwise	
  accessible	
  through,	
  our	
  website	
  is	
  not	
  incorporated	
  into,	
  and	
  does	
  not	
  form	
  a	
  part	
  of,	
  this	
  report.	
  

AVAILABLE	
  INFORMATION	
  

We	
  make	
  available	
  free	
  of	
  charge	
  through	
  our	
  website	
  (www.hersha.com)	
  our	
  code	
  of	
  ethics,	
  corporate	
  

governance	
  guidelines	
  and	
  the	
  charters	
  of	
  the	
  committees	
  of	
  our	
  Board	
  of	
  Trustees	
  (Acquisition	
  Committee,	
  Audit	
  
Committee,	
  Compensation	
  Committee,	
  Nominating	
  and	
  Corporate	
  Governance	
  Committee	
  and	
  Risk	
  
Sub-‐Committee	
  of	
  the	
  Audit	
  Committee).	
  We	
  also	
  make	
  available	
  through	
  our	
  website	
  our	
  annual	
  reports	
  on	
  Form	
  
10-‐K,	
  quarterly	
  reports	
  on	
  Form	
  10-‐Q,	
  current	
  reports	
  on	
  Form	
  8-‐K	
  and	
  amendments	
  to	
  those	
  reports	
  filed	
  or	
  
furnished	
  pursuant	
  to	
  Section	
  13(a)	
  or	
  15(d)	
  of	
  the	
  Exchange	
  Act	
  as	
  soon	
  as	
  reasonably	
  practicable	
  after	
  such	
  
documents	
  are	
  electronically	
  filed	
  with,	
  or	
  furnished	
  to,	
  the	
  SEC.	
  The	
  information	
  available	
  on	
  our	
  website	
  is	
  not,	
  

2 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

and	
  shall	
  not	
  be	
  deemed	
  to	
  be,	
  a	
  part	
  of	
  this	
  report	
  or	
  incorporated	
  into	
  any	
  other	
  filings	
  we	
  make	
  with	
  the	
  SEC.	
  

INVESTMENT	
  IN	
  HOTEL	
  PROPERTIES	
  

Our	
  operating	
  strategy	
  focuses	
  on	
  increasing	
  hotel	
  performance	
  for	
  our	
  portfolio.	
  The	
  key	
  elements	
  of	
  this	
  

strategy	
  are:	
  

•	
  

•	
  

working	
   together	
   with	
   our	
   hotel	
   management	
   companies	
   to	
   increase	
   revenue	
   per	
   available	
   room,	
   or	
  
"RevPAR"	
   and	
   to	
   maximize	
   the	
   average	
   daily	
   rate,	
   or	
   “ADR”	
   and	
   occupancy	
   levels	
   through	
   active	
  
property-‐level	
   management,	
  
intensive	
   marketing	
   efforts	
   to	
   tour	
   groups,	
   corporate	
   and	
  
government	
   extended	
   stay	
   customers	
   and	
   other	
   wholesale	
   customers	
   and	
   expanded	
   yield	
   management	
  
programs,	
  which	
  are	
  calculated	
  to	
  better	
  match	
  room	
  rates	
  to	
  room	
  demand;	
  and	
  
maximizing	
  our	
  earnings	
  by	
  managing	
  costs	
  and	
  positioning	
  our	
  hotels	
  to	
  capitalize	
  on	
  increased	
  demand	
  in	
  
the	
  high	
  quality,	
  upper-‐upscale,	
  upscale,	
  mid-‐scale	
  and	
  extended-‐stay	
  lodging	
  segments,	
  which	
  we	
  believe	
  
can	
  be	
  expected	
  to	
  follow	
  from	
  improving	
  economic	
  conditions.	
  

including	
  

ACQUISITIONS	
  

We	
  selectively	
  acquire	
  high	
  quality	
  branded	
  upper-‐upscale,	
  upscale,	
  mid-‐scale	
  and	
  extended-‐stay	
  hotels	
  in	
  
metropolitan	
  markets	
  with	
  high	
  barriers-‐to-‐entry	
  and	
  independent	
  boutique	
  hotels	
  in	
  similar	
  markets.	
  Through	
  our	
  
due	
  diligence	
  process,	
  we	
  select	
  those	
  acquisition	
  targets	
  where	
  we	
  believe	
  selective	
  capital	
  improvements	
  and	
  
intensive	
  management	
  will	
  increase	
  the	
  hotel’s	
  ability	
  to	
  attract	
  key	
  demand	
  segments,	
  enhance	
  hotel	
  operations	
  
and	
  increase	
  long-‐term	
  value.	
  In	
  executing	
  our	
  disciplined	
  acquisition	
  program,	
  we	
  will	
  consider	
  acquiring	
  hotels	
  
that	
  meet	
  the	
  following	
  additional	
  criteria:	
  

•	
  

•	
  

•	
  
•	
  

nationally-‐franchised	
   hotels	
   operating	
   under	
   popular	
   brands,	
   such	
   as	
   Marriott,	
   Residence	
   Inn	
   by	
   Marriott,	
  
Courtyard	
   by	
   Marriott,	
   Hilton	
   Hotels,	
   Hilton	
   Garden	
   Inn,	
   Hampton	
   Inn,	
   Holiday	
   Inn,	
   Holiday	
   Inn	
   Express,	
  
Holiday	
  Inn	
  Express	
  and	
  Suites,	
  Candlewood	
  Suites,	
  Hyatt	
  House,	
  Hyatt	
  Place,	
  Hyatt	
  and	
  Sheraton	
  Hotels;	
  
hotels	
  in	
  locations	
  with	
  significant	
  barriers-‐to-‐entry,	
  such	
  as	
  high	
  development	
  costs,	
  limited	
  availability	
  of	
  
land	
  and	
  lengthy	
  entitlement	
  processes;	
  
hotels	
  in	
  our	
  target	
  markets	
  where	
  we	
  can	
  realize	
  operating	
  efficiencies	
  and	
  economies	
  of	
  scale;	
  and	
  
independent	
  boutique	
  hotels	
  in	
  similar	
  markets	
  

Since	
  our	
  initial	
  public	
  offering	
  in	
  January	
  1999	
  and	
  through	
  December	
  31,	
  2014,	
  we	
  have	
  acquired,	
  wholly	
  

or	
  through	
  joint	
  ventures,	
  a	
  total	
  of	
  107	
  hotels,	
  including	
  28	
  hotels	
  acquired	
  from	
  entities	
  controlled	
  by	
  certain	
  of	
  
our	
  trustees	
  and	
  executive	
  officers.	
  Of	
  the	
  28	
  acquisitions	
  from	
  entities	
  controlled	
  by	
  certain	
  of	
  our	
  trustees	
  and	
  
executive	
  officers,	
  25	
  were	
  newly	
  constructed	
  or	
  substantially	
  renovated	
  by	
  these	
  entities	
  prior	
  to	
  our	
  acquisition.	
  
We	
  take	
  advantage	
  of	
  our	
  relationships	
  with	
  entities	
  that	
  are	
  developing	
  or	
  substantially	
  renovating	
  hotels,	
  
including	
  entities	
  controlled	
  by	
  certain	
  of	
  our	
  trustees	
  and	
  executive	
  officers,	
  to	
  identify	
  future	
  hotel	
  acquisitions	
  
that	
  we	
  believe	
  may	
  be	
  attractive	
  to	
  us.	
  We	
  intend	
  to	
  continue	
  to	
  acquire	
  hotels	
  from	
  entities	
  controlled	
  by	
  certain	
  
of	
  our	
  trustees	
  and	
  executive	
  officers	
  if	
  approved	
  by	
  a	
  majority	
  of	
  our	
  independent	
  trustees	
  in	
  accordance	
  with	
  our	
  
related	
  party	
  transaction	
  policy.	
  

DISPOSITIONS	
  

We	
  evaluate	
  our	
  hotels	
  on	
  a	
  periodic	
  basis	
  to	
  determine	
  if	
  these	
  hotels	
  continue	
  to	
  satisfy	
  our	
  investment	
  

criteria.	
  We	
  may	
  sell	
  hotels	
  opportunistically	
  based	
  upon	
  management’s	
  forecast	
  and	
  review	
  of	
  the	
  cash	
  flow	
  
potential	
  of	
  each	
  hotel	
  and	
  re-‐deploy	
  the	
  proceeds	
  into	
  debt	
  reduction	
  or	
  acquisitions	
  of	
  hotels.	
  We	
  utilize	
  several	
  
criteria	
  to	
  determine	
  the	
  long-‐term	
  potential	
  of	
  our	
  hotels.	
  Hotels	
  are	
  identified	
  for	
  sale	
  based	
  upon	
  management’s	
  
forecast	
  of	
  the	
  strength	
  of	
  each	
  hotel’s	
  cash	
  flows	
  and	
  its	
  ability	
  to	
  remain	
  accretive	
  to	
  our	
  portfolio.	
  Our	
  decision	
  
to	
  sell	
  a	
  hotel	
  is	
  often	
  predicated	
  upon	
  the	
  size	
  of	
  the	
  hotel,	
  strength	
  of	
  the	
  franchise,	
  property	
  condition	
  and	
  
related	
  costs	
  to	
  renovate	
  the	
  property,	
  strength	
  of	
  market	
  demand	
  generators,	
  projected	
  supply	
  of	
  hotel	
  rooms	
  in	
  
the	
  market,	
  probability	
  of	
  increased	
  valuation	
  and	
  geographic	
  profile	
  of	
  the	
  hotel.	
  All	
  asset	
  sales	
  are	
  

3 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

comprehensively	
  reviewed	
  by	
  the	
  Acquisition	
  Committee	
  of	
  our	
  Board	
  of	
  Trustees,	
  which	
  committee	
  consists	
  solely	
  
of	
  independent	
  trustees.	
  During	
  the	
  time	
  since	
  our	
  initial	
  public	
  offering	
  in	
  1999	
  through	
  December	
  31,	
  2014,	
  we	
  
have	
  sold	
  a	
  total	
  of	
  62	
  hotels.	
  

FINANCING	
  

We	
  intend	
  to	
  finance	
  our	
  long-‐term	
  growth	
  with	
  common	
  and	
  preferred	
  equity	
  issuances	
  and	
  debt	
  
financing	
  having	
  staggered	
  maturities.	
  Our	
  debt	
  includes	
  unsecured	
  debt	
  provided	
  primarily	
  under	
  our	
  $500	
  million	
  
unsecured	
  credit	
  facility	
  which	
  provides	
  for	
  a	
  $250	
  million	
  unsecured	
  term	
  loan	
  and	
  a	
  $250	
  million	
  unsecured	
  
revolving	
  credit	
  facility	
  and	
  secured	
  mortgage	
  debt	
  in	
  our	
  hotel	
  properties.	
  We	
  intend	
  to	
  use	
  our	
  loan	
  capacity,	
  
expanded	
  in	
  February	
  2014	
  as	
  discussed	
  below	
  and	
  the	
  undrawn	
  portion	
  of	
  our	
  $500	
  million	
  senior	
  unsecured	
  
credit	
  facility	
  to	
  pay	
  down	
  mortgage	
  debt	
  and	
  fund	
  future	
  acquisitions,	
  as	
  well	
  as	
  for	
  capital	
  improvements	
  and	
  
working	
  capital	
  requirements.	
  Subject	
  to	
  market	
  conditions,	
  we	
  intend	
  to	
  repay	
  amounts	
  outstanding	
  under	
  the	
   	
  
revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  credit	
  facility	
  from	
  time	
  to	
  time	
  with	
  proceeds	
  from	
  periodic	
  common	
  and	
  
preferred	
  equity	
  issuances,	
  long-‐term	
  debt	
  financings	
  and	
  cash	
  flows	
  from	
  operations.	
  When	
  purchasing	
  hotel	
  
properties,	
  we	
  may	
  issue	
  common	
  and	
  preferred	
  limited	
  partnership	
  interests	
  in	
  our	
  operating	
  partnership	
  as	
  full	
  
or	
  partial	
  consideration	
  to	
  sellers.	
  

FRANCHISE	
  AGREEMENTS	
  

We	
  believe	
  that	
  the	
  public’s	
  perception	
  of	
  quality	
  associated	
  with	
  a	
  franchisor	
  is	
  an	
  important	
  feature	
  in	
  

the	
  operation	
  of	
  a	
  hotel.	
  Franchisors	
  provide	
  a	
  variety	
  of	
  benefits	
  for	
  franchisees,	
  which	
  include	
  national	
  
advertising,	
  publicity	
  and	
  other	
  marketing	
  programs	
  designed	
  to	
  increase	
  brand	
  awareness,	
  training	
  of	
  personnel,	
  
continuous	
  review	
  of	
  quality	
  standards	
  and	
  centralized	
  reservation	
  systems.	
  Most	
  of	
  our	
  hotels	
  operate	
  under	
  
franchise	
  licenses	
  from	
  national	
  hotel	
  franchisors,	
  including:	
  

Franchisor	
  

Franchises	
  

Marriott	
  International	
  
Hilton	
  Hotels	
  Corporation	
  
IHG	
  
Hyatt	
  Hotels	
  Corporation	
  
Starwood	
  Hotels	
  

	
   Marriott,	
  Residence	
  Inn	
  by	
  Marriott,	
  Courtyard	
  by	
  Marriott	
  
	
   Hilton	
  Hotels,	
  Hilton	
  Garden	
  Inn,	
  Hampton	
  Inn	
  
	
   Holiday	
  Inn,	
  Holiday	
  Inn	
  Express,	
  Holiday	
  Inn	
  Express	
  &	
  Suites,	
  Candlewood	
  Suites	
  
	
   Hyatt	
  House,	
  Hyatt	
  Place,	
  Hyatt	
  
	
   Sheraton	
  Hotels	
  

We	
  anticipate	
  that	
  most	
  of	
  the	
  hotels	
  in	
  which	
  we	
  invest	
  will	
  be	
  operated	
  pursuant	
  to	
  franchise	
  licenses.	
  

The	
  franchise	
  licenses	
  generally	
  specify	
  certain	
  management,	
  operational,	
  record-‐keeping,	
  accounting,	
  

reporting	
  and	
  marketing	
  standards	
  and	
  procedures	
  with	
  which	
  the	
  franchisee	
  must	
  comply.	
  The	
  franchise	
  licenses	
  
generally	
  obligate	
  our	
  lessees	
  to	
  comply	
  with	
  the	
  franchisors’	
  standards	
  and	
  requirements	
  with	
  respect	
  to	
  training	
  
of	
  operational	
  personnel,	
  safety,	
  maintaining	
  specified	
  insurance,	
  the	
  types	
  of	
  services	
  and	
  products	
  ancillary	
  to	
  
guest	
  room	
  services	
  that	
  may	
  be	
  provided	
  by	
  our	
  lessees,	
  display	
  of	
  signage,	
  and	
  the	
  type,	
  quality	
  and	
  age	
  of	
  
furniture,	
  fixtures	
  and	
  equipment	
  included	
  in	
  guest	
  rooms,	
  lobbies	
  and	
  other	
  common	
  areas.	
  In	
  general,	
  the	
  
franchise	
  licenses	
  require	
  us	
  to	
  pay	
  the	
  franchisor	
  a	
  fee	
  typically	
  ranging	
  between	
  6.0%	
  and	
  9.3%	
  of	
  such	
  hotel’s	
  
revenues	
  annually.	
  

PROPERTY	
  MANAGEMENT	
  

We	
  work	
  closely	
  with	
  our	
  hotel	
  management	
  companies	
  to	
  operate	
  our	
  hotels	
  and	
  increase	
  same	
  hotel	
  

performance	
  for	
  our	
  portfolio.	
  

Through	
  our	
  TRS	
  and	
  our	
  investment	
  in	
  joint	
  ventures,	
  we	
  have	
  retained	
  the	
  following	
  management	
  

companies	
  to	
  operate	
  our	
  hotels,	
  as	
  of	
  December	
  31,	
  2014:	
  

4 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

Manager	
  

	
   Hotels	
   	
  

	
   Rooms	
  

	
   Hotels	
  

	
   Rooms	
  

	
   Hotels	
  

	
   Rooms	
  

Wholly	
  Owned	
  

Joint	
  Ventures	
  

Total	
  

Hersha	
  Hospitality	
  Management,	
  
L.P.	
  

Waterford	
  Hotel	
  Group,	
  Inc.	
  

South	
  Bay	
  Boston	
  Management,	
  Inc.	
  	
  

Northwood	
  Management,	
  LLC.	
  

	
   45	
  	
  

	
   6,742	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   1	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

148	
  	
  

Total	
  

	
   46	
  	
  

	
   6,890	
  	
  

	
   -‐	
  	
  

	
   3	
  	
  

	
   2	
  	
  

  - 	
  

	
   5	
  	
  

	
   -‐	
  	
  

	
   45	
  	
  

	
   1,087	
  	
  

	
   282	
  	
  

  - 	
  

	
   3	
  	
  

	
   2	
  	
  

	
   1	
  	
  

	
   6,439	
  

	
   1,087	
  

	
   282	
  

	
   148	
  

	
   1,369	
  	
  

	
   51	
  	
  

	
   8,259	
  

Each	
  management	
  agreement	
  provides	
  for	
  a	
  set	
  term	
  and	
  is	
  subject	
  to	
  early	
  termination	
  upon	
  the	
  

occurrence	
  of	
  defaults	
  and	
  certain	
  other	
  events	
  described	
  therein.	
  As	
  required	
  under	
  the	
  REIT	
  qualification	
  rules,	
  
all	
  managers,	
  including	
  HHMLP,	
  must	
  qualify	
  as	
  an	
  “eligible	
  independent	
  contractor”	
  during	
  the	
  term	
  of	
  the	
  
management	
  agreements.	
  

Under	
  the	
  management	
  agreements,	
  the	
  manager	
  generally	
  pays	
  the	
  operating	
  expenses	
  of	
  our	
  hotels.	
  All	
  
operating	
  expenses	
  or	
  other	
  expenses	
  incurred	
  by	
  the	
  manager	
  in	
  performing	
  its	
  authorized	
  duties	
  are	
  reimbursed	
  
or	
  borne	
  by	
  our	
  applicable	
  TRS	
  to	
  the	
  extent	
  the	
  operating	
  expenses	
  or	
  other	
  expenses	
  are	
  incurred	
  within	
  the	
  
limits	
  of	
  the	
  applicable	
  approved	
  hotel	
  operating	
  budget.	
  Our	
  managers	
  are	
  not	
  obligated	
  to	
  advance	
  any	
  of	
  their	
  
own	
  funds	
  for	
  operating	
  expenses	
  of	
  a	
  hotel	
  or	
  to	
  incur	
  any	
  liability	
  in	
  connection	
  with	
  operating	
  a	
  hotel.	
  

For	
  their	
  services,	
  the	
  managers	
  receive	
  a	
  base	
  management	
  fee,	
  and	
  if	
  a	
  hotel	
  meets	
  and	
  exceeds	
  certain	
  

thresholds,	
  an	
  additional	
  incentive	
  management	
  fee.	
  For	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  these	
  thresholds	
  
were	
  not	
  met	
  and	
  incentive	
  management	
  fees	
  were	
  not	
  earned.	
  The	
  base	
  management	
  fee	
  for	
  a	
  hotel	
  is	
  due	
  
monthly	
  and	
  is	
  generally	
  equal	
  to	
  3%	
  of	
  the	
  gross	
  revenues	
  associated	
  with	
  that	
  hotel	
  for	
  the	
  related	
  month.	
  

EMPLOYEES	
  

As	
  of	
  December	
  31,	
  2014,	
  we	
  had	
  48	
  employees	
  who	
  were	
  principally	
  engaged	
  in	
  managing	
  the	
  affairs	
  of	
  

the	
  Company	
  unrelated	
  to	
  property	
  operations.	
   	
   We	
  believe	
  that	
  our	
  relations	
  with	
  our	
  employees	
  are	
  
satisfactory.	
  

TAX	
  STATUS	
  

We	
  elected	
  to	
  be	
  taxed	
  as	
  a	
  REIT	
  under	
  Sections	
  856	
  through	
  860	
  of	
  the	
  Code,	
  commencing	
  with	
  our	
  

taxable	
  year	
  ended	
  December	
  31,	
  1999.	
  As	
  long	
  as	
  we	
  qualify	
  for	
  taxation	
  as	
  a	
  REIT,	
  we	
  generally	
  will	
  not	
  be	
  subject	
  
to	
  federal	
  income	
  tax	
  on	
  the	
  portion	
  of	
  our	
  income	
  that	
  is	
  currently	
  distributed	
  to	
  our	
  shareholders.	
  If	
  we	
  fail	
  to	
  
qualify	
  as	
  a	
  REIT	
  in	
  any	
  taxable	
  year	
  and	
  do	
  not	
  qualify	
  for	
  certain	
  statutory	
  relief	
  provisions,	
  we	
  will	
  be	
  subject	
  to	
  
federal	
  income	
  tax	
  (including	
  any	
  applicable	
  alternative	
  minimum	
  tax)	
  on	
  our	
  taxable	
  income	
  at	
  regular	
  corporate	
  
tax	
  rates.	
   	
   Additionally,	
  we	
  will	
  generally	
  be	
  unable	
  to	
  qualify	
  as	
  a	
  REIT	
  for	
  four	
  years	
  following	
  the	
  year	
  in	
  which	
  
qualification	
  is	
  lost.	
   	
   Even	
  if	
  we	
  qualify	
  for	
  taxation	
  as	
  a	
  REIT,	
  we	
  will	
  be	
  subject	
  to	
  certain	
  state	
  and	
  local	
  taxes	
  on	
  
our	
  income	
  and	
  property	
  and	
  to	
  federal	
  income	
  and	
  excise	
  taxes	
  on	
  our	
  undistributed	
  income.	
  

We	
  own	
  interests	
  in	
  several	
  TRSs.	
  We	
  may	
  own	
  up	
  to	
  100%	
  of	
  the	
  stock	
  of	
  a	
  TRS.	
  A	
  TRS	
  is	
  a	
  taxable	
  
corporation	
  that	
  may	
  lease	
  hotels	
  from	
  our	
  operating	
  partnership	
  and	
  its	
  subsidiaries	
  under	
  certain	
  circumstances.	
  
Overall,	
  no	
  more	
  than	
  25%	
  of	
  the	
  value	
  of	
  our	
  assets	
  may	
  consist	
  of	
  securities	
  of	
  one	
  or	
  more	
  TRSs.	
  In	
  addition,	
  no	
  
more	
  than	
  25%	
  of	
  our	
  gross	
  income	
  for	
  any	
  year	
  may	
  consist	
  of	
  dividends	
  from	
  one	
  or	
  more	
  TRSs	
  and	
  income	
  from	
  
certain	
  non-‐real	
  estate	
  related	
  sources.	
  

A	
  TRS	
  is	
  permitted	
  to	
  lease	
  hotels	
  from	
  us	
  as	
  long	
  as	
  the	
  hotels	
  are	
  operated	
  on	
  behalf	
  of	
  the	
  TRS	
  by	
  a	
  

third	
  party	
  manager	
  that	
  qualifies	
  as	
  an	
  "eligible	
  independent	
  contractor."	
  To	
  qualify	
  for	
  that	
  treatment,	
  the	
  
manager	
  must	
  satisfy	
  the	
  following	
  requirements:	
  

5 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

1.	
  

2.	
  
3.	
  

4.	
  

such	
   manager	
   is,	
   or	
   is	
   related	
   to	
   a	
   person	
   who	
   is,	
   actively	
   engaged	
   in	
   the	
   trade	
   or	
   business	
   of	
   operating	
  
“qualified	
  lodging	
  facilities”	
  for	
  any	
  person	
  unrelated	
  to	
  us	
  and	
  the	
  TRS;	
  
such	
  manager	
  does	
  not	
  own,	
  directly	
  or	
  indirectly,	
  more	
  than	
  35%	
  of	
  our	
  shares;	
  
no	
  more	
  than	
  35%	
  of	
  such	
  manager	
  is	
  owned,	
  directly	
  or	
  indirectly,	
  by	
  one	
  or	
  more	
  persons	
  owning	
  35%	
  or	
  
more	
  of	
  our	
  shares;	
  and	
  
we	
  do	
  not,	
  directly	
  or	
  indirectly,	
  derive	
  any	
  income	
  from	
  such	
  manager.	
  

The	
  deductibility	
  of	
  interest	
  paid	
  or	
  accrued	
  by	
  a	
  TRS	
  to	
  us	
  is	
  limited	
  to	
  assure	
  that	
  the	
  TRS	
  is	
  subject	
  to	
  an	
  

appropriate	
  level	
  of	
  corporate	
  taxation.	
  A	
  100%	
  excise	
  tax	
  is	
  imposed	
  on	
  transactions	
  between	
  a	
  TRS	
  and	
  us	
  that	
  
are	
  not	
  on	
  an	
  arm’s-‐length	
  basis.	
  

FINANCIAL	
  INFORMATION	
  ABOUT	
  SEGMENTS	
  

We	
  are	
  in	
  the	
  business	
  of	
  acquiring	
  equity	
  interests	
  in	
  hotels,	
  and	
  we	
  manage	
  our	
  hotels	
  as	
  individual	
  

operating	
  segments	
  that	
  meet	
  the	
  aggregation	
  criteria	
  and	
  are	
  therefore	
  disclosed	
  as	
  one	
  reportable	
  segment.	
  See	
  
“Note	
  1	
  -‐	
  Organization	
  and	
  Summary	
  of	
  Significant	
  Accounting	
  Policies”	
  in	
  Item	
  8	
  of	
  this	
  Annual	
  Report	
  on	
  Form	
  
10-‐K	
  for	
  segment	
  financial	
  information.	
  

6 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

Item	
  2.	
   	
  

Properties	
  

The	
  following	
  table	
  sets	
  forth	
  certain	
  information	
  with	
  respect	
  to	
  the	
  46	
  hotels	
  we	
  wholly	
  owned	
  as	
  of	
  December	
  
31,	
  2014,	
  all	
  of	
  which	
  are	
  consolidated	
  on	
  the	
  Company’s	
  financial	
  statements.	
  

Market	
  

Name	
  

Location	
  

Year	
  Opened	
  

	
   Number	
  of	
  Rooms	
  

Boston	
  Urban	
  and	
  
Metro	
  

	
   Courtyard	
   	
  

	
   Brookline/Boston,	
  MA*	
  

Hawthorn	
  Suites	
  by	
  
Wyndham	
  

	
   Franklin,	
  MA	
   	
  

	
   Holiday	
  Inn	
  Express	
  

	
   Cambridge,	
  MA	
   	
  

	
   Residence	
  Inn	
   	
  

	
   Residence	
  Inn	
   	
  

	
   The	
  Boxer	
  

	
   Framingham,	
  MA	
  

	
   Norwood,	
  MA	
   	
  

	
   Boston,	
  MA	
  

California	
  -‐	
  Arizona	
  

	
   Courtyard	
   	
  

	
   Courtyard	
   	
  

	
   Hyatt	
  House	
  

	
   Hyatt	
  House	
  

	
   Hyatt	
  House	
  

	
   Hotel	
  Milo	
  

	
   Blue	
  Moon	
  

	
   Courtyard	
   	
  

	
   Residence	
  Inn	
  

	
   Winter	
  Haven	
  

South	
  Florida	
  

	
   San	
  Diego,	
  CA	
  

	
   Los	
  Angeles,	
  CA	
  

	
   Pleasant	
  Hill,	
  CA	
  

	
   Pleasanton,	
  CA	
   	
  

	
   Scottsdale,	
  AZ	
   	
  

	
   Santa	
  Barbara,	
  CA*	
  

	
   Miami,	
  FL	
  

	
   Miami,	
  FL	
  

	
   Coconut	
  Grove,	
  FL	
  

	
   Miami,	
  FL	
  

	
   Parrot	
  Key	
  Hotel	
  &	
  Resort	
  

	
   Key	
  West,	
  FL	
  

NYC	
  Urban	
  

	
   Candlewood	
  Suites	
  

	
   Times	
  Square,	
  NY	
  

	
   Duane	
  Street	
  

	
   Hampton	
  Inn	
  

	
   Hampton	
  Inn	
  

	
   Hampton	
  Inn	
  

	
   Hampton	
  Inn	
  

	
   Hampton	
  Inn	
  

	
   TriBeCa,	
  NY	
   	
  

	
   Chelsea/Manhattan,	
  NY	
  

	
   Herald	
  Square,	
  Manhattan,	
  NY	
   	
  

	
   Seaport,	
  NY	
   	
  

	
   Times	
  Square,	
  NY	
  

	
   Pearl	
  Street,	
  Manhattan,	
  NY	
  

	
   Hilton	
  Garden	
  Inn	
  

	
   JFK	
  Airport,	
  NY*	
   	
  

	
   Hilton	
  Garden	
  Inn	
  

	
   TriBeCa,	
  NY	
   	
  

	
   Holiday	
  Inn	
   	
  

	
   Wall	
  Street,	
  NY	
  

	
   Holiday	
  Inn	
  Express	
  

	
   Times	
  Square,	
  NY	
  

	
   Holiday	
  Inn	
  Express	
  

	
   Water	
  Street,	
  Manhattan,	
  NY	
  

	
   Holiday	
  Inn	
  Express	
  

	
   Madison	
  Square	
  Garden,	
  Manhattan,	
  NY	
   	
  

	
   Hyatt	
  

	
   Nu	
  Hotel	
  

	
   Union	
  Square,	
  NY	
  

	
   Brooklyn,	
  NY	
   	
  

	
   Sheraton	
  Hotel	
  

	
   JFK	
  Airport,	
  NY*	
  

	
   Hilton	
  Garden	
  Inn	
  

	
   Midtown	
  East,	
  Manhattan,	
  NY	
  

NY-‐NJ	
  Metro	
  

	
   Holiday	
  Inn	
  Express	
  

	
   Chester,	
  NY	
   	
  

	
   Hyatt	
  House	
  

	
   White	
  Plains,	
  NY	
   	
  

2003	
  

1999	
  

1997	
  

2000	
  

2006	
  

2004	
  

1999	
  

2008	
  

2003	
  

1998	
  

1999	
  

2001	
  

2013	
  

2004	
  

2000	
  

2013	
  

2013	
  

2009	
  

2008	
  

2003	
  

2005	
  

2006	
  

2009	
  

2012	
  

2005	
  

2009	
  

2010	
  

2009	
  

2010	
  

2006	
  

2013	
  

2008	
  

2008	
  

2014	
  

2006	
  

2000	
  

188	
  

100	
  

112	
  

125	
  

96	
  

80	
  

245	
  

260	
  

142	
  

128	
  

164	
  

122	
  

75	
  

357	
  

140	
  

70	
  

148	
  

188	
  

43	
  

144	
  

136	
  

65	
  

184	
  

81	
  

192	
  

151	
  

113	
  

210	
  

112	
  

228	
  

178	
  

93	
  

150	
  

205	
  

80	
  

159	
  

7 

	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

Market	
  

Name	
  

Property	
  Name	
  

Year	
  Opened	
  

	
   Number	
  of	
  Rooms	
  

Philadelphia	
  

	
   Hampton	
  Inn	
  

	
   Hyatt	
  Place	
  

	
   Philadelphia,	
  PA	
   	
  

	
   King	
  of	
  Prussia,	
  PA	
  

	
   Sheraton	
  Hotel	
  

	
   New	
  Castle,	
  DE	
  

	
   The	
  Rittenhouse	
  Hotel	
  

	
   Philadelphia,	
  PA	
   	
  

Washington	
  D.C.	
  

	
   Courtyard	
   	
  

	
   Hampton	
  Inn	
  

	
   Hyatt	
  House	
  

	
   Residence	
  Inn	
   	
  

	
   Residence	
  Inn	
   	
  

	
   Alexandria,	
  VA	
   	
  

	
   Washington,	
  DC	
  

	
   Gaithersburg,	
  MD	
   	
  

	
   Tysons	
  Corner,	
  VA	
   	
  

	
   Greenbelt,	
  MD	
  

	
   The	
  Capitol	
  Hill	
  Hotel	
  

	
   Washington,	
  DC	
  

2001	
  

2010	
  

2011	
  

2004	
  

2006	
  

2005	
  

1998	
  

1984	
  

2002	
  

2007	
  

250	
  

129	
  

192	
  

116	
  

203	
  

228	
  

140	
  

96	
  

120	
  

152	
  

	
   TOTAL	
  ROOMS	
  

6,890	
  

*	
  

Our	
  interests	
  in	
  these	
  hotels	
  are	
  subject	
  to	
  ground	
  leases	
  which,	
  in	
  most	
  cases,	
  require	
  monthly	
  rental	
  
payment	
  as	
  determined	
  by	
  the	
  applicable	
  ground	
  lease	
  agreement.	
  These	
  ground	
  lease	
  agreements	
  
typically	
  have	
  initial	
  terms	
  of	
  99	
  years	
  and	
  all	
  have	
  a	
  remaining	
  term	
  of	
  at	
  least	
  85	
  years.	
  

The	
  following	
  table	
  sets	
  forth	
  certain	
  information	
  with	
  respect	
  to	
  the	
  five	
  hotels	
  we	
  owned	
  through	
  

unconsolidated	
  joint	
  ventures	
  with	
  third	
  parties	
  as	
  of	
  December	
  31,	
  2014.	
  

Market	
  

Name	
  

Location	
  

Boston	
   	
  

	
   Courtyard	
   	
  
	
   South	
  Boston,	
  MA**	
  
	
   Holiday	
  Inn	
  Express	
   	
   South	
  Boston,	
  MA**	
  

Connecticut	
   	
  

	
   Hilton	
  
	
   Marriott	
  
	
   Marriott	
  

	
   Hartford,	
  CT	
   	
  
	
   Mystic,	
  CT	
  
	
   Hartford,	
  CT	
   	
  

Year	
  
Opened	
  

Number	
  
of	
  Rooms	
   	
  

HHLP	
  
Ownership	
  
in	
  Asset	
  

HHLP	
  
Preferred	
  
Return	
  

2005	
  	
  
1998	
  	
  

2005	
  	
  
2001	
  	
  
2005	
  	
  

164	
  	
  
118	
  	
  

393	
  	
  
285	
  	
  
409	
  	
  

50.0%	
  	
  
50.0%	
  	
  

8.8%	
  	
  
66.7%	
  	
  
15.0%	
  	
  

N/A	
  	
  
N/A	
  	
  

8.5%	
  	
  
8.5%	
  	
  
8.5%	
  	
  

TOTAL	
  ROOMS	
  	
  

1,369	
   	
  	
  

**	
  

The	
  joint	
  ventures	
  interests	
  in	
  these	
  hotels	
  are	
  subject	
  to	
  ground	
  leases	
  which,	
  in	
  most	
  cases,	
  require	
  
monthly	
  rental	
  payment	
  as	
  determined	
  by	
  the	
  applicable	
  ground	
  lease	
  agreements.	
  These	
  ground	
  lease	
  
agreements	
  typically	
  have	
  terms	
  of	
  60	
  years	
  and	
  all	
  have	
  a	
  remaining	
  term	
  of	
  at	
  least	
  47	
  years.	
  

8 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
   	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
   	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

PART	
  II	
  

Item	
  5.	
  

Market	
  for	
  Registrant’s	
  Common	
  Equity,	
  Related	
  Stockholder	
  Matters	
  and	
  Issuer	
  
Purchases	
  of	
  Equity	
  Securities	
  

MARKET	
  INFORMATION	
  

Our	
  common	
  shares	
  trade	
  on	
  the	
  New	
  York	
  Stock	
  Exchange	
  under	
  the	
  symbol	
  “HT.”	
  As	
  of	
  February	
  19,	
  

2015,	
  the	
  last	
  reported	
  closing	
  price	
  per	
  common	
  share	
  on	
  the	
  New	
  York	
  Stock	
  Exchange	
  was	
  $6.80.	
  The	
  following	
  
table	
  sets	
  forth	
  the	
  high	
  and	
  low	
  sales	
  price	
  per	
  common	
  share	
  reported	
  on	
  the	
  New	
  York	
  Stock	
  Exchange	
  as	
  traded	
  
and	
  the	
  dividends	
  paid	
  on	
  the	
  common	
  shares	
  for	
  each	
  of	
  the	
  quarters	
  indicated.	
  

Year	
  Ended	
  December	
  31,	
  2014	
  

High	
  

Low	
  

Fourth	
  Quarter	
  
Third	
  Quarter	
  
Second	
  Quarter	
  
First	
  Quarter	
  

Year	
  Ended	
  December	
  31,	
  2013	
  

Fourth	
  Quarter	
  
Third	
  Quarter	
  
Second	
  Quarter	
  
First	
  Quarter	
  

SHAREHOLDER	
  INFORMATION	
  

$	
  
$	
  
$	
  
$	
  

$	
  
$	
  
$	
  
$	
  

	
   7.49	
  	
  
	
   6.95	
  	
  
	
   6.74	
  	
  
	
   6.05	
  	
  

High	
  

	
   5.94	
  	
  
	
   6.21	
  	
  
	
   6.24	
  	
  
	
   6.30	
  	
  

$	
  
$	
  
$	
  
$	
  

$	
  
$	
  
$	
  
$	
  

	
   6.15	
  	
  
	
   6.35	
  	
  
	
   5.52	
  	
  
	
   5.18	
  	
  

Low	
  

	
   5.33	
  	
  
	
   5.18	
  	
  
	
   5.27	
  	
  
	
   5.07	
  	
  

$	
  
$	
  
$	
  
$	
  

$	
  
$	
  
$	
  
$	
  

Dividend	
  Per	
  
Common	
  Share	
  

	
   0.07	
  
	
   0.07	
  
	
   0.06	
  
	
   0.06	
  

Dividend	
  Per	
  
Common	
  Share	
  

	
   0.06	
  
	
   0.06	
  
	
   0.06	
  
	
   0.06	
  

At	
  December	
  31,	
  2014	
  we	
  had	
  approximately	
  120	
  shareholders	
  of	
  record	
  of	
  our	
  common	
  shares.	
  Common	
  

Units	
  (which	
  are	
  redeemable	
  by	
  holders	
  for	
  cash	
  or,	
  at	
  our	
  option,	
  for	
  common	
  shares	
  on	
  a	
  one	
  for	
  one	
  basis,	
  
subject	
  to	
  certain	
  limitations)	
  were	
  held	
  by	
  approximately	
  38	
  entities	
  and	
  persons,	
  including	
  our	
  company.	
  

9 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

SHARE	
  PERFORMANCE	
  GRAPH	
  

The	
  following	
  graph	
  compares	
  the	
  yearly	
  change	
  in	
  our	
  cumulative	
  total	
  shareholder	
  return	
  on	
  our	
  

common	
  shares	
  for	
  the	
  period	
  beginning	
  December	
  31,	
  2008	
  and	
  ending	
  December	
  31,	
  2014,	
  with	
  the	
  yearly	
  
changes	
  in	
  the	
  Standard	
  &	
  Poor’s	
  500	
  Stock	
  Index	
  (the	
  S&P	
  500	
  Index),	
  the	
  Russell	
  2000	
  Index,	
  and	
  the	
  SNL	
  Hotel	
  
REIT	
  Index	
  for	
  the	
  same	
  period,	
  assuming	
  a	
  base	
  share	
  price	
  of	
  $100.00	
  for	
  our	
  common	
  shares,	
  the	
  S&P	
  500	
  Index,	
  
the	
  Russell	
  2000	
  Index	
  and	
  the	
  Hotel	
  REIT	
  Index	
  for	
  comparative	
  purposes.	
  The	
  Hotel	
  REIT	
  Index	
  is	
  comprised	
  of	
  
publicly	
  traded	
  REITs	
  which	
  focus	
  on	
  investments	
  in	
  hotel	
  properties.	
  Total	
  shareholder	
  return	
  equals	
  appreciation	
  
in	
  stock	
  price	
  plus	
  dividends	
  paid	
  and	
  assumes	
  that	
  all	
  dividends	
  are	
  reinvested.	
  The	
  performance	
  graph	
  is	
  not	
  
indicative	
  of	
  future	
  investment	
  performance.	
  We	
  do	
  not	
  make	
  or	
  endorse	
  any	
  predictions	
  as	
  to	
  future	
  share	
  price	
  
performance.	
  

Hersha	
  Hospitality	
  Trust	
  	
   $	
  
S&P	
  500	
  
Russell	
  2000	
  
SNL	
  Hotel	
  REIT	
  Index	
  

	
   $	
  

2008	
  
	
   100.00	
  
	
   100.00	
  	
  
	
   100.00	
  	
  
	
   100.00	
  	
  

2009	
  
	
   104.67	
  $	
  
	
   123.45	
  	
  
	
   125.22	
  	
  
	
   163.13	
  	
  

2010	
  
	
   220.00	
  $	
  
	
   139.23	
  	
  
	
   156.90	
  	
  
	
   225.86	
  	
  

2011	
  
	
   162.67	
  $	
  
	
   139.23	
  	
  
	
   148.35	
  	
  
	
   191.77	
  	
  

2012	
  
	
   166.67	
  $	
  
	
   157.90	
  	
  
	
   170.06	
  	
  
	
   210.14	
  	
  

2013	
  
	
   218.13	
  $	
  
	
   204.63	
  	
  
	
   232.98	
  	
  
	
   257.04	
  	
  

2014	
  
	
   285.49	
  
	
   232.30	
  
	
   244.24	
  
	
   339.27	
  

10 

70542_PG10-10K-final.indd   1

4/2/15   8:01 PM

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

UNREGISTERED	
  SALES	
  OF	
  EQUITY	
  SECURITIES	
  AND	
  USE	
  OF	
  PROCEEDS	
  	
  

A	
  summary	
  of	
  our	
  common	
  share	
  repurchases	
  (in	
  millions,	
  except	
  average	
  price	
  per	
  share)	
  during	
  the	
  year	
  

ended	
  December	
  31,	
  2014	
  under	
  the	
  $75	
  million	
  repurchase	
  program	
  authorized	
  by	
  our	
  Board	
  of	
  Trustees	
  in	
  
December	
  2012	
  and	
  reauthorized	
  in	
  January	
  2014,	
  which	
  expired	
  on	
  December	
  31,	
  2014,	
  is	
  set	
  forth	
  in	
  the	
  table	
  
below.	
  In	
  February	
  2015,	
  our	
  Board	
  of	
  Trustees	
  again	
  authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  
aggregate	
  of	
  $100	
  million	
  of	
  our	
  outstanding	
  common	
  shares.	
   	
   All	
  such	
  common	
  shares	
  were	
  repurchased	
  
pursuant	
  to	
  open	
  market	
  transactions.	
   	
  

Issuer	
  Purchases	
  of	
  Common	
  Stock	
  

Total	
  
Number	
  of	
  
Shares	
  
Purchased	
  

Average	
  
Price	
  
Paid	
  Per	
  
Share	
  

Total	
  Number	
  of	
  
Shares	
  Purchased	
  As	
  
Part	
  of	
  Publicly	
  
Announced	
  Plans	
  or	
  
Programs	
  

Maximum	
  Number	
  (or	
  
Approximate	
  Dollar	
  
Value)	
  of	
  Shares	
  That	
  
May	
  Yet	
  Be	
  Purchased	
  
Under	
  the	
  Plans	
  or	
  
Programs	
  (in	
  thousands)	
  
as	
  of	
  12/31/2014	
  

	
   -‐	
   	
  
	
   -‐	
   	
  

	
   N/A	
  
	
   N/A	
  

N/A	
  
N/A	
  

	
   2,626,854	
  	
   $	
  

5.80	
  	
  

	
   2,626,854	
  	
  

	
   $	
  

Period	
  

January	
  1	
  to	
  January	
  31,	
  2014	
  
February	
  1	
  to	
  February	
  28,	
  2014	
  
March	
  1	
  to	
  March	
  31,	
  2014	
  
April	
  1	
  to	
  April	
  30,	
  2014	
  
May	
  1	
  to	
  May	
  31,	
  2014	
  
June	
  1	
  to	
  June	
  30,	
  2014	
  
July	
  1	
  to	
  July	
  31,	
  2014	
  
August	
  1	
  to	
  August	
  31,	
  2014	
  
September	
  1	
  to	
  September	
  30,	
  
2014	
  
October	
  1	
  to	
  October	
  31,	
  2014	
  
November	
  1	
  to	
  November	
  30,	
  
2014	
  
December	
  1	
  to	
  December	
  31,	
  
2014	
  

Total	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   2,626,854	
  	
  

N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  

N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  
N/A	
  

	
   75,000	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (15,418)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   2,626,854	
  	
   $	
  

	
   59,582	
  *	
  

*	
  

The	
  repurchase	
  program	
  was	
  reauthorized	
  by	
  our	
  Board	
  of	
  Trustees	
  in	
  February	
  2015,	
  resulting	
  in	
  an	
  
aggregate	
  dollar	
  value	
  of	
  the	
  maximum	
  number	
  of	
  common	
  shares	
  that	
  may	
  be	
  purchased	
  as	
  of	
  February	
  
20,	
  2015	
  of	
  $100	
  million.	
  

11 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

Item	
  6.	
  

Selected	
  Financial	
  Data	
  

The	
  following	
  sets	
  forth	
  selected	
  financial	
  and	
  operating	
  data	
  on	
  a	
  historical	
  consolidated	
  basis.	
  The	
  

following	
  data	
  should	
  be	
  read	
  in	
  conjunction	
  with	
  the	
  financial	
  statements	
  and	
  notes	
  thereto	
  and	
  Management’s	
  
Discussion	
  and	
  Analysis	
  of	
  Financial	
  Condition	
  and	
  Results	
  of	
  Operations	
  included	
  elsewhere	
  in	
  this	
  Form	
  10-‐K.	
   	
   	
  
As	
  a	
  result	
  of	
  the	
  early	
  adoption	
  on	
  January	
  1,	
  2014	
  of	
  ASU	
  Update	
  No.	
  2014-‐08,	
  we	
  do	
  not	
  expect	
  to	
  classify	
  most	
  
of	
  our	
  hotel	
  dispositions	
  as	
  discontinued	
  operations.	
   	
   For	
  purposes	
  of	
  this	
  table	
  below,	
  the	
  operating	
  results	
  of	
  
certain	
  real	
  estate	
  assets	
  which	
  have	
  been	
  sold	
  prior	
  to	
  the	
  adoption	
  of	
  ASU	
  Update	
  No.	
  2014-‐08	
  are	
  included	
  in	
  
discontinued	
  operations	
  for	
  all	
  periods	
  presented.	
  

HERSHA	
  HOSPITALITY	
  TRUST	
  
SELECTED	
  FINANCIAL	
  DATA	
  
(In	
  thousands,	
  except	
  per	
  share	
  data)	
  

Revenue:	
   	
  

Hotel	
  Operating	
  Revenues	
   	
  
Interest	
  Income	
  From	
  Development	
  Loans	
  
Other	
  Revenues	
  

Total	
  Revenue	
   	
  
Operating	
  Expenses:	
   	
  

Hotel	
  Operating	
  Expenses	
   	
  
Gain	
  on	
  Insurance	
  Settlements	
  
Hotel	
  Ground	
  Rent	
  
Real	
  Estate	
  and	
  Personal	
  Property	
  Taxes	
  and	
  Property	
  Insurance	
   	
  
General	
  and	
  Administrative	
  (including	
  Share	
  Based	
  Payments	
  of	
  
$6,028,	
  $9,746,	
  $9,678,	
  $7,590,	
  $6,649)	
  
Acquisition	
  and	
  Terminated	
  Transaction	
  Costs	
  
Depreciation	
  and	
  Amortization	
   	
  
Contingent	
  Consideration	
  
Total	
  Operating	
  Expenses	
   	
  
Operating	
  Income	
  (Loss)	
  

Interest	
  Income	
  
Interest	
  Expense	
   	
  
Other	
  Expense	
  
Gain	
  on	
  Disposition	
  of	
  Hotel	
  Properties	
  
Gain	
  on	
  Hotel	
  Acquisitions,	
  net	
  
Development	
  Loan	
  Recovery	
  
Loss	
  on	
  Debt	
  Extinguishment	
  

2014	
  

2013	
  

2012	
  

2011	
  

2010	
  

$	
  

	
   417,226	
  	
   $	
  

	
   -‐	
  	
  
	
   180	
  	
  	
  
	
   417,406	
  	
  	
  

	
   227,324	
  	
  	
  
	
   (4,604)	
  	
  
	
   2,433	
  	
  	
  
	
   30,342	
  	
  	
  

	
   20,363	
  	
  	
  
	
   2,472	
  	
  	
  
	
   69,167	
  	
  	
  
	
   2,000	
  	
  	
  
	
   349,497	
  	
  	
  
	
   67,909	
  	
  	
  
	
   805	
  	
  	
  
	
   (43,357)	
  	
  
	
   (485)	
  	
  
	
   7,195	
  	
  	
  
	
   12,667	
  	
  	
  
	
   22,494	
  	
  	
  
	
   (670)	
  	
  

	
   338,064	
  	
   $	
  
	
   158	
  	
  	
  
	
   191	
  	
  	
  
	
   338,413	
  	
  	
  

	
   299,005	
  	
   $	
  
	
   1,998	
  	
  	
  
	
   212	
  	
  	
  
	
   301,215	
  	
  	
  

	
   229,156	
  	
   $	
  
	
   3,427	
  	
  	
  
	
   330	
  	
  	
  
	
   232,913	
  	
  	
  

	
   184,998	
  	
  
	
   4,686	
  	
  
	
   324	
  	
  
	
   190,008	
  	
  

	
   188,431	
  	
  	
  
	
   (403)	
  	
  
	
   985	
  	
  	
  
	
   24,083	
  	
  	
  

	
   23,869	
  	
  	
  
	
   974	
  	
  	
  
	
   55,784	
  	
  	
  
	
   -‐	
  	
  
	
   293,723	
  	
  	
  
	
   44,690	
  	
  	
  
	
   1,784	
  	
  	
  
	
   (40,935)	
  	
  
	
   (102)	
  	
  
	
   -‐	
  	
  
	
   12,096	
  	
  	
  
	
   -‐	
  	
  
	
   (545)	
  	
  

	
   161,982	
  	
  	
  
	
   -‐	
  	
  
	
   835	
  	
  	
  
	
   19,341	
  	
  	
  

	
   23,377	
  	
  	
  
	
   1,179	
  	
  	
  
	
   48,243	
  	
  	
  
	
   -‐	
  	
  
	
   254,957	
  	
  	
  
	
   46,258	
  	
  	
  
	
   1,311	
  	
  	
  
	
   (38,070)	
  	
  
	
   (43)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (3,189)	
  	
  

	
   121,402	
  	
  	
  
	
   -‐	
  	
  
	
   877	
  	
  	
  
	
   15,936	
  	
  	
  

	
   18,449	
  	
  	
  
	
   2,734	
  	
  	
  
	
   40,562	
  	
  	
  
	
   -‐	
  	
  
	
   199,960	
  	
  	
  
	
   32,953	
  	
  	
  
	
   456	
  	
  	
  
	
   (34,266)	
  	
  
	
   (231)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (102)	
  	
  

	
   98,930	
  	
  
	
   -‐	
  
	
   941	
  	
  
	
   13,738	
  	
  

	
   16,833	
  	
  
	
   4,785	
  	
  
	
   34,060	
  	
  
	
   -‐	
  
	
   169,287	
  	
  
	
   20,721	
  	
  
	
   168	
  	
  
	
   (32,409)	
  
	
   (240)	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   (852)	
  

Income	
  (Loss)	
  before	
  (Loss)	
  Income	
  from	
  Unconsolidated	
  Joint	
  
Venture	
  Investments	
  and	
  Discontinued	
  Operations	
   	
  

	
   66,558	
  	
  	
  

	
   16,988	
  	
  	
  

	
   6,267	
  	
  	
  

	
   (1,190)	
  	
  

	
   (12,612)	
  

(Loss)	
  Income	
  from	
  Unconsolidated	
  Joint	
  Ventures	
  

	
   693	
  	
  	
  

	
   (22)	
  	
  

	
   (232)	
  	
  

	
   210	
  	
  	
  

	
   (1,751)	
  

Impairment	
  of	
  Investment	
  in	
  Unconsolidated	
  Joint	
  Ventures	
  
(Loss)	
  Gain	
  from	
  Remeasurement	
  of	
  Investment	
  in	
  Unconsolidated	
  
Joint	
  Ventures	
  

(Loss)	
  Income	
  from	
  Unconsolidated	
  Joint	
  Venture	
  Investments	
  

Income	
  (Loss)	
  Before	
  Income	
  Taxes	
  
Income	
  Tax	
  Benefit	
  

Income	
  (Loss)	
  from	
  Continuing	
  Operations	
  
Discontinued	
  Operations:	
  

Gain(Loss)	
  on	
  Disposition	
  of	
  Hotel	
  Properties	
  
Impairment	
  of	
  Assets	
  Held	
  for	
  Sale	
  
Income	
  (Loss)	
  from	
  Discontinued	
  Operations	
   	
  

Income	
  (Loss)	
  from	
  Discontinued	
  Operations	
  
Net	
  Income	
  (Loss)	
  

(Income)	
  Loss	
  Allocated	
  to	
  Noncontrolling	
  Interests	
  
Issuance	
  Costs	
  of	
  Redeemed	
  Preferred	
  Shares	
  
Preferred	
  Distributions	
  

Net	
  Income	
  (Loss)	
  applicable	
  to	
  Common	
  Shareholders	
  

$	
  

	
   -‐	
  	
  

	
   (1,813)	
  	
  

	
   -‐	
  	
  

	
   (1,677)	
  	
  

	
   -‐	
  

	
   -‐	
  	
  
	
   693	
  	
  	
  
	
   67,251	
  	
  	
  
	
   2,685	
  	
  	
  
	
   69,936	
  	
  	
  

	
   -‐	
  	
  
	
   (1,835)	
  	
  
	
   15,153	
  	
  	
  
	
   5,600	
  	
  	
  
	
   20,753	
  	
  	
  

	
   (128)	
  	
  
	
   (1,800)	
  	
  
	
   263	
  	
  	
  
	
   (1,665)	
  	
  
	
   68,271	
  	
  	
  
	
   (1,016)	
  	
  
	
   -‐	
  	
  
	
   (14,356)	
  	
  
	
   52,899	
  	
   $	
  

	
   32,121	
  	
  	
  
	
   (10,314)	
  	
  
	
   7,388	
  	
  	
  
	
   29,195	
  	
  	
  
	
   49,948	
  	
  	
  
	
   (335)	
  	
  
	
   (2,250)	
  	
  
	
   (14,611)	
  	
  
	
   32,752	
  	
   $	
  

	
   (1,892)	
  	
  
	
   (2,124)	
  	
  
	
   4,143	
  	
  	
  
	
   3,355	
  	
  	
  
	
   7,498	
  	
  	
  

	
   11,231	
  	
  	
  
	
   -‐	
  	
  
	
   3,489	
  	
  	
  
	
   14,720	
  	
  	
  
	
   22,218	
  	
  	
  
	
   158	
  	
  	
  
	
   -‐	
  	
  
	
   (14,000)	
  	
  

	
   8,376	
  	
   $	
  

	
   2,757	
  	
  	
  
	
   1,290	
  	
  	
  
	
   100	
  	
  	
  
	
   -‐	
  	
  
	
   100	
  	
  	
  

	
   991	
  	
  	
  
	
   (30,248)	
  	
  
	
   2,189	
  	
  	
  
	
   (27,068)	
  	
  
	
   (26,968)	
  	
  
	
   1,734	
  	
  	
  
	
   -‐	
  	
  
	
   (10,499)	
  	
  
	
   (35,733)	
   $	
  

	
   4,008	
  	
  
	
   2,257	
  	
  
	
   (10,355)	
  
	
   -‐	
  
	
   (10,355)	
  

	
   347	
  	
  
	
   (2,433)	
  
	
   (4,761)	
  
	
   (6,847)	
  
	
   (17,202)	
  
	
   845	
  	
  
	
   -‐	
  
	
   (4,800)	
  
	
   (21,157)	
  

12 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

HERSHA	
  HOSPITALITY	
  TRUST	
  
SELECTED	
  FINANCIAL	
  DATA	
  
(In	
  thousands,	
  except	
  per	
  share	
  data)	
  

Basic	
  Income	
  (Loss)	
  from	
  Continuing	
  Operations	
  applicable	
  to	
  
Common	
  Shareholders	
  
Diluted	
  Income	
  (Loss)	
  from	
  Continuing	
  Operations	
  applicable	
  to	
  
Common	
  Shareholders	
  (1)	
  
Dividends	
  declared	
  per	
  Common	
  Share	
   	
  

$	
  

	
   0.27	
  	
  $	
  

	
   0.02	
  	
   $	
  

	
   (0.03)	
   $	
  

	
   (0.06)	
   $	
  

	
   (0.11)	
  

	
   0.27	
  	
  	
  

	
   0.26	
  	
  	
  

	
   0.02	
  	
  	
  

	
   0.24	
  	
  	
  

	
   (0.03)	
  	
  

	
   0.24	
  	
  	
  

	
   (0.06)	
  	
  

	
   0.23	
  	
  	
  

	
   (0.11)	
  

	
   0.20	
  	
  

2014	
  

2013	
  

2012	
  

2011	
  

2010	
  

Balance	
  Sheet	
  Data	
   	
  

Net	
  investment	
  in	
  hotel	
  properties	
   	
  

$	
   	
   1,745,483	
  	
  $	
   	
   1,535,835	
  	
   $	
   	
   1,466,713	
  	
   $	
   	
   1,341,536	
  	
   $	
   	
   1,245,851	
  	
  

Assets	
  Held	
  for	
  Sale	
   	
  

Noncontrolling	
  Interests	
  Common	
  Units	
  

Redeemable	
  Noncontrolling	
  Interest	
  

Noncontrolling	
  Interests	
  Consolidated	
  Joint	
  Ventures	
  

	
   -‐	
  	
  

	
   29,082	
  	
  	
  

	
   56,583	
  	
  	
  

	
   29,523	
  	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

Noncontrolling	
  Interests	
  Consolidated	
  Variable	
  Interest	
  Entity	
  

	
   (1,075)	
  	
  

	
   (342)	
  	
  

	
   -‐	
  	
  

	
   15,484	
  	
  	
  

	
   15,321	
  	
  	
  

	
   -‐	
  	
  

	
   476	
  	
  	
  

	
   93,829	
  	
  	
  

	
   16,862	
  	
  	
  

	
   14,955	
  	
  	
  

	
   307	
  	
  	
  

	
   -‐	
  	
  

	
   -‐	
  

	
   19,410	
  	
  

	
   19,894	
  	
  

	
   474	
  	
  

	
   -‐	
  

Shareholder's	
  equity	
   	
  

Total	
  assets	
   	
  

Total	
  debt	
   	
  

	
   829,382	
  	
  	
  

	
   837,958	
  	
  	
  

	
   829,828	
  	
  	
  

	
   730,673	
  	
  	
  

	
   683,434	
  	
  

	
   1,855,539	
  	
  	
  

	
   1,748,097	
  	
  	
  

	
   1,707,679	
  	
  	
  

	
   1,630,909	
  	
  	
  

	
   1,457,277	
  	
  

	
   918,923	
  	
  	
  

	
   773,501	
  	
  	
  

	
   792,708	
  	
  	
  

	
   758,374	
  	
  	
  

	
   694,720	
  	
  

Liabilities	
  related	
  to	
  Assets	
  Held	
  for	
  Sale	
   	
  

	
   -‐	
  	
  

	
   45,835	
  	
  	
  

	
   -‐	
  	
  

	
   61,758	
  	
  	
  

	
   -‐	
  

Other	
  Data	
   	
  

Net	
  cash	
  provided	
  by	
  operating	
  activities	
   	
  

Net	
  cash	
  used	
  in	
  investing	
  activities	
   	
  

Net	
  cash	
  provided	
  by	
  financing	
  activities	
   	
  

Weighted	
  average	
  shares	
  outstanding	
   	
  

Basic	
   	
  
Diluted	
  (1)	
  

$	
  

$	
  

$	
  

	
   112,894	
  	
  $	
  

	
   90,261	
  	
   $	
  

	
   71,756	
  	
   $	
  

	
   58,668	
  	
   $	
  

	
   42,486	
  	
  

	
   (180,504)	
  $	
  

	
   (125,474)	
   $	
  

	
   (55,817)	
   $	
  

	
   (230,758)	
   $	
  

	
   (310,567)	
  

	
   53,072	
  	
  $	
  

	
   2,367	
  	
   $	
  

	
   28,552	
  	
   $	
  

	
   131,062	
  	
   $	
  

	
   322,273	
  	
  

	
   199,109,209	
  	
  

	
  198,390,450	
  

	
  187,415,270	
  

	
  168,753,382	
  

	
  134,370,172	
  

	
   201,197,310	
  	
  

	
  201,918,177	
  

	
  187,415,270	
  

	
  168,753,382	
  

	
  134,370,172	
  

(1)	
   	
  

Income	
  allocated	
  to	
  noncontrolling	
  interest	
  in	
  HHLP	
  has	
  been	
  excluded	
  from	
  the	
  numerator	
  and	
  Common	
  
Units	
  have	
  been	
  omitted	
  from	
  the	
  denominator	
  for	
  the	
  purpose	
  of	
  computing	
  diluted	
  earnings	
  per	
  share	
  
because	
  the	
  effect	
  of	
  including	
  these	
  amounts	
  in	
  the	
  numerator	
  and	
  denominator	
  would	
  have	
  no	
  impact.	
  

13 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

Item	
  7.	
  

Management’s	
  Discussion	
  and	
  Analysis	
  of	
  Financial	
  Condition	
  and	
  Results	
  of	
  
Operations	
  

Certain	
  statements	
  appearing	
  in	
  this	
  Item	
  7	
  are	
  forward-‐looking	
  statements	
  within	
  the	
  meaning	
  of	
  the	
  

federal	
  securities	
  laws.	
  Our	
  actual	
  results	
  may	
  differ	
  materially.	
  We	
  caution	
  you	
  not	
  to	
  place	
  undue	
  reliance	
  on	
  any	
  
such	
  forward-‐looking	
  statements.	
  See	
  “Cautionary	
  Factors	
  That	
  May	
  Affect	
  Future	
  Results”	
  for	
  additional	
  
information	
  regarding	
  our	
  forward-‐looking	
  statements.	
  

BACKGROUND	
  

As	
  of	
  December	
  31,	
  2014,	
  we	
  owned	
  interests	
  in	
  51	
  hotels	
  in	
  major	
  urban	
  gateway	
  markets	
  including	
  New	
  

York,	
  Washington	
  DC,	
  Boston,	
  Philadelphia,	
  San	
  Diego,	
  Los	
  Angeles	
  and	
  Miami,	
  including	
  46	
  wholly-‐owned	
  hotels	
  
and	
  interests	
  in	
  five	
  hotels	
  owned	
  through	
  unconsolidated	
  joint	
  ventures.	
  Our	
  "Summary	
  of	
  Operating	
  Results"	
  
section	
  below	
  contains	
  operating	
  results	
  for	
  46	
  consolidated	
  hotel	
  assets	
  and	
  five	
  hotel	
  assets	
  owned	
  through	
  
unconsolidated	
  joint	
  ventures.	
  	
  We	
  have	
  elected	
  to	
  be	
  taxed	
  as	
  a	
  REIT	
  for	
  federal	
  income	
  tax	
  purposes,	
  beginning	
  
with	
  the	
  taxable	
  year	
  ended	
  December	
  31,	
  1999.	
  For	
  purposes	
  of	
  the	
  REIT	
  qualification	
  rules,	
  we	
  cannot	
  directly	
  
operate	
  any	
  of	
  our	
  hotels.	
  Instead,	
  we	
  must	
  lease	
  our	
  hotels	
  to	
  a	
  third	
  party	
  lessee	
  or	
  to	
  a	
  TRS,	
  provided	
  that	
  the	
  
TRS	
  engages	
  an	
  eligible	
  independent	
  contractor	
  to	
  manage	
  the	
  hotels.	
   	
   As	
  of	
  December	
  31,	
  2014,	
  we	
  have	
  leased	
  
all	
  of	
  our	
  hotels	
  to	
  a	
  wholly-‐owned	
  TRS,	
  a	
  joint	
  venture	
  owned	
  TRS,	
  or	
  an	
  entity	
  owned	
  by	
  our	
  wholly-‐owned	
  TRS.	
  
Each	
  of	
  these	
  TRS	
  entities	
  will	
  pay	
  qualifying	
  rent,	
  and	
  the	
  TRS	
  entities	
  have	
  entered	
  into	
  management	
  contracts	
  
with	
  qualified	
  independent	
  managers,	
  including	
  HHMLP,	
  with	
  respect	
  to	
  our	
  hotels.	
  We	
  intend	
  to	
  lease	
  all	
  newly	
  
acquired	
  hotels	
  to	
  a	
  TRS.	
  The	
  TRS	
  structure	
  enables	
  us	
  to	
  participate	
  more	
  directly	
  in	
  the	
  operating	
  performance	
  of	
  
our	
  hotels.	
  The	
  TRS	
  directly	
  receives	
  all	
  revenue	
  from,	
  and	
  funds	
  all	
  expenses	
  relating	
  to,	
  hotel	
  operations.	
  The	
  TRS	
  
is	
  also	
  subject	
  to	
  income	
  tax	
  on	
  its	
  earnings.	
  

OVERVIEW	
  

We	
  believe	
  the	
  improvements	
  in	
  our	
  equity	
  and	
  debt	
  capitalization	
  and	
  repositioning	
  of	
  our	
  portfolio	
  

better	
  enables	
  us	
  to	
  capitalize	
  on	
  further	
  improvement	
  in	
  lodging	
  fundamentals.	
  During	
  2014,	
  we	
  continued	
  to	
  see	
  
improvements	
  in	
  ADR,	
  RevPAR	
  and	
  operating	
  margins,	
  led	
  by	
  hotels	
  in	
  most	
  of	
  our	
  major	
  locations.	
  We	
  continue	
  to	
  
seek	
  acquisition	
  opportunities	
  in	
  urban	
  centers	
  and	
  central	
  business	
  districts.	
  In	
  addition,	
  we	
  will	
  continue	
  to	
  look	
  
for	
  attractive	
  opportunities	
  to	
  dispose	
  of	
  properties	
  in	
  secondary	
  and	
  tertiary	
  markets	
  at	
  favorable	
  prices,	
  
potentially	
  redeploying	
  that	
  capital	
  in	
  our	
  focus	
  markets.	
  We	
  do	
  not	
  expect	
  to	
  actively	
  pursue	
  acquisitions	
  made	
  
through	
  joint	
  ventures	
  in	
  the	
  near	
  term;	
  however,	
  we	
  may	
  seek	
  to	
  buy	
  out,	
  or	
  sell	
  our	
  joint	
  venture	
  interests	
  to,	
  
select	
  existing	
  joint	
  venture	
  partners.	
  We	
  do	
  not	
  expect	
  to	
  actively	
  pursue	
  development	
  loans	
  or	
  land	
  leases	
  in	
  the	
  
near	
  term.	
  

Although	
  we	
  expect	
  continued	
  stabilization	
  and	
  improvement	
  in	
  consumer	
  and	
  commercial	
  spending	
  and	
  
lodging	
  demand	
  during	
  2015,	
  the	
  manner	
  in	
  which	
  the	
  economy	
  will	
  continue	
  to	
  grow,	
  if	
  at	
  all,	
  is	
  not	
  predictable.	
  
In	
  addition,	
  the	
  availability	
  of	
  hotel-‐level	
  financing	
  for	
  the	
  acquisition	
  of	
  new	
  hotels	
  is	
  not	
  within	
  our	
  control.	
  As	
  a	
  
result,	
  there	
  can	
  be	
  no	
  assurances	
  that	
  we	
  will	
  be	
  able	
  to	
  grow	
  hotel	
  revenues,	
  occupancy,	
  ADR	
  or	
  RevPAR	
  at	
  our	
  
properties	
  as	
  we	
  hope.	
   	
   Factors	
  that	
  might	
  contribute	
  to	
  less	
  than	
  anticipated	
  performance	
  include	
  those	
  
described	
  under	
  the	
  heading	
  “Item	
  1A.	
  Risk	
  Factors”	
  and	
  other	
  documents	
  that	
  we	
  may	
  file	
  with	
  the	
  SEC	
  in	
  the	
  
future.	
  We	
  will	
  continue	
  to	
  cautiously	
  monitor	
  recovery	
  in	
  lodging	
  demand	
  and	
  rates,	
  our	
  third	
  party	
  hotel	
  
managers	
  and	
  our	
  performance	
  generally.	
  

14 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

SUMMARY	
  OF	
  OPERATING	
  RESULTS	
  

The	
  following	
  table	
  outlines	
  operating	
  results	
  for	
  the	
  Company’s	
  portfolio	
  of	
  wholly	
  owned	
  hotels	
  and	
  

those	
  owned	
  through	
  joint	
  venture	
  interests	
  (excluding	
  hotel	
  assets	
  classified	
  as	
  discontinued	
  operations)	
  that	
  are	
  
consolidated	
  in	
  our	
  financial	
  statements	
  for	
  the	
  three	
  years	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  2012.	
  

CONSOLIDATED	
  HOTELS:	
  

Year	
  Ended	
  
2014	
  

Year	
  Ended	
  
2013	
  

2014	
  
vs.	
  2013	
  
%	
  Variance	
  	
  

Year	
  Ended	
  
2012	
  

2013	
  
vs.	
  2012	
  
%	
  Variance	
  

Occupancy	
  
$	
  
Average	
  Daily	
  Rate	
  (ADR)	
  
Revenue	
  Per	
  Available	
  Room	
  (RevPAR)	
   $	
  

82.6%	
  	
  
	
   187.82	
  	
   $	
  
	
   155.19	
  	
   $	
  

79.7%	
  	
  
	
   179.70	
  	
  
	
   143.30	
  	
  

2.9%	
  
4.5%	
  
8.3%	
  

78.6%	
  	
  
	
   175.23	
  	
  
	
   137.78	
  	
  

	
   $	
  
	
   $	
  

1.1%	
  
2.6%	
  
4.0%	
  

Room	
  Revenues	
  
Hotel	
  Operating	
  Revenues	
  

$	
  
$	
  

	
   380,461	
  	
   $	
  
	
   417,226	
  	
   $	
  

	
   309,452	
  	
  
	
   338,064	
  	
  

22.9%	
  
23.4%	
  

	
   $	
  
	
   $	
  

	
   273,410	
  	
  
	
   299,005	
  	
  

13.2%	
  
13.1%	
  

RevPAR	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  increased	
  8.3%	
  for	
  our	
  consolidated	
  hotels	
  when	
  

compared	
  to	
  the	
  same	
  period	
  in	
  2013.	
  This	
  increase	
  represents	
  a	
  continued	
  growth	
  trend	
  in	
  RevPAR,	
  which	
  is	
  
primarily	
  due	
  to	
  the	
  improving	
  economic	
  conditions	
  in	
  2014	
  and	
  the	
  acquisition	
  of	
  hotel	
  properties	
  consummated	
  
in	
  2014	
  that	
  are	
  accretive	
  to	
  RevPAR.	
   	
   The	
  increase,	
  as	
  noted	
  in	
  the	
  table	
  above,	
  was	
  the	
  result	
  of	
  increases	
  in	
  
both	
  occupancy	
  and	
  ADR.	
  Performing	
  particularly	
  well	
  in	
  2014	
  were	
  hotels	
  in	
  our	
  Boston,	
  West	
  Coast,	
  South	
  
Florida	
  and	
  Washington	
  DC	
  markets,	
  each	
  of	
  which	
  posted	
  RevPAR	
  growth	
  in	
  excess	
  of	
  11.0%	
  versus	
  the	
  same	
  
period	
  in	
  2013.	
   	
  

The	
  following	
  table	
  outlines	
  operating	
  results	
  for	
  the	
  three	
  years	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  
2012	
  for	
  hotels	
  we	
  own	
  through	
  unconsolidated	
  joint	
  venture	
  interests	
  (excluding	
  those	
  hotel	
  assets	
  have	
  been	
  
sold	
  to	
  an	
  independent	
  third	
  party	
  during	
  the	
  period	
  presented).	
  These	
  operating	
  results	
  reflect	
  100%	
  of	
  the	
  
operating	
  results	
  of	
  the	
  property	
  including	
  our	
  interest	
  and	
  the	
  interests	
  of	
  our	
  joint	
  venture	
  partners	
  and	
  other	
  
noncontrolling	
  interest	
  holders.	
  

UNCONSOLIDATED	
  JOINT	
  VENTURES:	
  

Year	
  Ended	
  
2014	
  

Year	
  Ended	
  
2013	
  

2014	
  
vs.	
  2013	
  
%	
  Variance	
   	
  

Year	
  Ended	
  
2012	
  

2013	
  
vs.	
  2012	
  
%	
  Variance	
  

Occupancy	
  

67.2%	
  	
  

68.3%	
  	
  

-‐1.1%	
  

68.6%	
  	
  

-‐0.3%	
  

Average	
  Daily	
  Rate	
  (ADR)	
  

$	
  

	
   164.10	
  	
   $	
  

	
   154.57	
  	
  

Revenue	
  Per	
  Available	
  Room	
  (RevPAR)	
   $	
  

	
   110.33	
  	
   $	
  

	
   105.52	
  	
  

6.2%	
  

4.6%	
  

	
   $	
  

	
   $	
  

	
   152.51	
  	
  

	
   104.66	
  	
  

Room	
  Revenues	
  

Total	
  Revenues	
  

$	
  

$	
  

	
   59,135	
  	
   $	
  

	
   58,273	
  	
  

	
   80,860	
  	
   $	
  

	
   80,879	
  	
  

1.5%	
  

0.0%	
  

	
   $	
  

	
   $	
  

	
   62,058	
  	
  

	
   84,364	
  	
  

1.4%	
  

0.8%	
  

-‐6.1%	
  

-‐4.1%	
  

15 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

For	
  our	
  unconsolidated	
  hotels,	
  RevPAR	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  increased	
  4.6%	
  compared	
  
to	
  RevPAR	
  achieved	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
   	
   The	
  2014	
  results	
  reflect	
  the	
  overall	
  condition	
  of	
  
the	
  market	
  in	
  which	
  our	
  unconsolidated	
  joint	
  venture	
  hotels	
  operate,	
  particularly	
  Boston,	
  where	
  our	
  2	
  hotels	
  
posted	
  RevPAR	
  growth	
  of	
  15.1%.	
   	
   The	
  relatively	
  stable	
  results	
  in	
  RevPar	
  during	
  the	
  year	
  of	
  2013	
  when	
  compared	
  
to	
  the	
  year	
  of	
  2012	
  is	
  primarily	
  the	
  result	
  of	
  a	
  joint	
  venture	
  asset	
  which	
  is	
  now	
  consolidated	
  for	
  financial	
  reporting	
  
purposes	
  and	
  therefore	
  no	
  longer	
  contributes	
  to	
  the	
  operating	
  results	
  of	
  our	
  portfolio	
  of	
  unconsolidated	
  hotels.	
   	
  
The	
  Holiday	
  Inn	
  Express	
  29th	
  Street,	
  New	
  York,	
  NY,	
  which	
  as	
  of	
  June	
  18,	
  2012,	
  no	
  longer	
  was	
  included	
  in	
  our	
  
unconsolidated	
  joint	
  venture	
  hotel	
  portfolio,	
  tended	
  to	
  have	
  higher	
  occupancy	
  and	
  ADR	
  than	
  the	
  remaining	
  hotels	
  
in	
  our	
  unconsolidated	
  joint	
  venture	
  portfolio,	
  resulting	
  in	
  the	
  lower	
  room	
  revenues	
  and	
  total	
  revenues	
  in	
  the	
  above	
  
table.	
   	
   When	
  compared	
  to	
  the	
  same	
  period	
  in	
  2012,	
  the	
  remaining	
  unconsolidated	
  joint	
  venture	
  hotels	
  follow	
  the	
  
same	
  growth	
  trend	
  for	
  RevPar	
  as	
  experienced	
  in	
  our	
  same	
  store	
  consolidated	
  hotels	
  reported	
  below	
  during	
  the	
  
year	
  ended	
  December	
  31,	
  2013.	
  

We	
  define	
  a	
  same	
  store	
  consolidated	
  hotel	
  as	
  one	
  that	
  is	
  currently	
  consolidated,	
  that	
  we	
  have	
  owned	
  in	
  

whole	
  or	
  in	
  part	
  for	
  the	
  entire	
  period	
  being	
  reported	
  and	
  the	
  comparable	
  period	
  in	
  each	
  of	
  the	
  periods	
  being	
  
presented,	
  and	
  is	
  deemed	
  fully	
  operational.	
  Based	
  on	
  this	
  definition,	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014	
  and	
  
2013,	
  there	
  are	
  34	
  same	
  store	
  consolidated	
  hotels	
  and	
  31	
  same	
  store	
  consolidated	
  hotels	
  for	
  the	
  years	
  ended	
  
December	
  31,	
  2013	
  and	
  2012.	
  The	
  following	
  table	
  outlines	
  operating	
  results	
  for	
  the	
  years	
  ended	
  December	
  31,	
  
2014,	
  2013,	
  and	
  2012,	
  for	
  our	
  same	
  store	
  consolidated	
  hotels:	
  

SAME	
  STORE	
  CONSOLIDATED	
  
HOTELS:	
  

(includes	
  34	
  hotels	
  in	
  both	
  years)	
  
2014	
  
vs.	
  2013	
  
%	
  
Variance	
   	
  

Year	
  Ended	
  
2013	
  

Year	
  Ended	
  
2014	
  

(includes	
  31	
  hotels	
  in	
  both	
  years)	
  

Year	
  
Ended	
  
2013	
  

Year	
  
Ended	
  
2012	
  

2013	
  
vs.	
  2012	
  
%	
  Variance	
  

Occupancy	
  
Average	
  Daily	
  Rate	
  (ADR)	
  
Revenue	
  Per	
  Available	
  Room	
  
(RevPAR)	
  

82.9%	
  	
   	
  
	
   179.76	
  	
   $	
  

79.7%	
  	
  
	
   176.85	
  	
  

$	
  

3.2%	
  
1.6%	
  

80.5%	
  	
  
	
   174.65	
  	
   $	
  

78.6%	
  	
  
	
   172.67	
  	
  

	
   $	
  

1.9%	
  
1.1%	
  

$	
  

	
   148.97	
  	
   $	
  

	
   140.95	
  	
  

5.7%	
  

	
   $	
  

	
   140.55	
  	
   $	
  

	
   135.69	
  	
  

3.6%	
  

Room	
  Revenues	
  
Total	
  Revenues	
  

$	
   	
   280,421	
  	
   $	
   	
   265,142	
  	
  
$	
   	
   305,961	
  	
   $	
   	
   288,635	
  	
  

5.8%	
  
6.0%	
  

	
   $	
   	
   258,047	
  	
   $	
  
	
   $	
   	
   272,780	
  	
   $	
  

	
   249,848	
  	
  
	
   263,893	
  	
  

3.3%	
  
3.4%	
  

Driven	
  by	
  strong	
  performance	
  in	
  our	
  Boston,	
  West	
  Coast,	
  and	
  Washington	
  DC	
  markets,	
  RevPAR	
  for	
  our	
  

same	
  store	
  consolidated	
  hotels	
  increased	
  5.7%,	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2013.	
  

COMPARISON	
  OF	
  THE	
  YEAR	
  ENDED	
  DECEMBER	
  31,	
  2014	
  TO	
  DECEMBER	
  31,	
  2013	
  

(dollars	
  in	
  thousands,	
  except	
  ADR	
  and	
  per	
  share	
  data)	
  

Revenue	
  

Our	
  total	
  revenues	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014	
  and	
  2013	
  primarily	
  consisted	
  of	
  hotel	
  
operating	
  revenues	
  and	
  other	
  revenue.	
  Hotel	
  operating	
  revenues	
  were	
  approximately	
  100.0%	
  and	
  99.9%	
  of	
  total	
  
revenues	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014	
  and	
  2013,	
  respectively.	
  Hotel	
  operating	
  revenues	
  are	
  recorded	
  
for	
  wholly	
  owned	
  hotels	
  that	
  are	
  leased	
  to	
  our	
  wholly	
  owned	
  TRS	
  and	
  hotels	
  owned	
  through	
  joint	
  venture	
  interests	
  
that	
  were	
  consolidated	
  in	
  our	
  financial	
  statements	
  during	
  the	
  period.	
  Hotel	
  operating	
  revenues	
  increased	
  $79,162,	
  
or	
  23.4%,	
  from	
  $338,064	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  to	
  $417,226	
  for	
  the	
  same	
  period	
  in	
  2014.	
  This	
  
increase	
  in	
  hotel	
  operating	
  revenues	
  was	
  primarily	
  attributable	
  to	
  the	
  acquisitions	
  consummated	
  in	
  2014	
  and	
  2013	
  
as	
  well	
  as	
  increases	
  in	
  hotel	
  operating	
  revenues	
  for	
  our	
  same	
  store	
  consolidated	
  hotels.	
   	
  

16 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
   	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
   	
  
	
   	
   	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
   	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
  
	
  
	
  
hersha hospitality trust 

Since	
  December	
  31,	
  2013,	
  we	
  have	
  acquired	
  interests	
  in	
  three	
  consolidated	
  hotels	
  and	
  have	
  commenced	
  

operations	
  at	
  the	
  Hampton	
  Inn	
  Pearl	
  Street.	
  These	
  four	
  hotels	
  contributed	
  the	
  following	
  operating	
  revenues	
  for	
  
the	
  twelve	
  months	
  ended	
  December	
  31,	
  2014.	
  

Brand	
  

Location	
  

	
   Acquisition	
  Date	
  

	
   Rooms	
  

2014	
  Hotel	
  Operating	
  
Revenues	
  

Hotel	
  Milo	
  

Parrot	
  Key	
  Resort	
  

Hilton	
  Garden	
  Inn	
  52nd	
  
Street	
  
Hampton	
  Inn	
  Pearl	
  Street	
  

	
   Santa	
  Barbara,	
  CA	
  

	
   February	
  28,	
  2014	
  

	
   Key	
  West,	
  FL	
  

	
   May	
  7,	
  2014	
  

	
   New	
  York,	
  NY	
  

	
   May	
  30,	
  2014*	
  

	
   New	
  York,	
  NY	
  

	
   June	
  23,	
  2014*	
  

*	
  

Date	
  the	
  hotel	
  began	
  operations.	
  

	
   122	
  	
  

	
   148	
  	
  

	
   205	
  	
  

	
   81	
  	
  

	
   556	
  	
   $	
  

	
   8,655	
  

	
   9,145	
  

	
   10,439	
  

	
   2,867	
  

	
   31,106	
  

Revenues	
  for	
  all	
  hotels	
  were	
  recorded	
  from	
  the	
  date	
  of	
  acquisition	
  as	
  hotel	
  operating	
  revenues.	
  Further,	
  
hotel	
  operating	
  revenues	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  included	
  revenues	
  for	
  the	
  following	
  hotels	
  that	
  
were	
  purchased	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  Hotels	
  acquired	
  during	
  the	
  year	
  ended	
  December	
  31,	
  
2013	
  would	
  have	
  a	
  full	
  year	
  of	
  results	
  included	
  in	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  but	
  not	
  necessarily	
  a	
  full	
  year	
  
of	
  results	
  during	
  the	
  same	
  period	
  in	
  2013.	
   	
   	
  

We	
  acquired	
  interests	
  in	
  the	
  following	
  consolidated	
  hotels	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013:	
  

Brand	
  

Location	
  

	
   Acquisition	
  Date	
  

	
   Rooms	
  

2014	
  Hotel	
  Operating	
  
Revenues	
  

2013	
  Hotel	
  Operating	
  
Revenues	
  

Hyatt	
  Union	
  Square	
  

	
   New	
  York,	
  NY	
  

	
   April	
  9,	
  2013	
  

	
   178	
  	
  	
   $	
  

	
   19,066	
  	
  	
   $	
  

Courtyard	
  by	
  Marriott	
  

	
   San	
  Diego,	
  CA	
  

	
   May	
  30,	
  2013	
  

Residence	
  Inn	
  

	
   Coconut	
  Grove,	
  FL	
  

	
   June	
  12,	
  2013	
  

Winter	
  Haven	
  

	
   Miami,	
  FL	
  

	
   December	
  20,	
  2013	
  	
  

Blue	
  Moon	
  

	
   Miami,	
  FL	
  

	
   December	
  20,	
  2013	
  	
  

	
   245	
  	
  	
  

	
   140	
  	
  	
  

	
   70	
  	
  	
  

	
   75	
  	
  	
  

	
   16,205	
  	
   	
  

	
   4,424	
  	
   	
  

	
   4,185	
  	
  	
  

	
   4,446	
  	
  	
  

	
   11,272	
  	
  

	
   8,350	
  	
  

	
   2,889	
  	
  

	
   203	
  	
  

	
   175	
  	
  

	
   708	
  	
  	
   $	
  

	
   48,326	
  	
  	
   $	
  

	
   22,889	
  	
  

In	
  addition,	
  our	
  same	
  store	
  consolidated	
  portfolio	
  experienced	
  improvements	
  in	
  ADR	
  and	
  occupancy	
  

during	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2013.	
  Occupancy	
  in	
  our	
  same	
  
store	
  consolidated	
  hotels	
  increased	
  320	
  basis	
  points	
  from	
  79.7%	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  to	
  
82.9%	
  for	
  the	
  same	
  period	
  in	
  2014.	
  ADR	
  improved	
  1.6%,	
  increasing	
  from	
  $176.85	
  for	
  the	
  year	
  ended	
  December	
  31,	
  
2013	
  to	
  $179.76	
  during	
  the	
  same	
  period	
  in	
  2014.	
  These	
  improvements	
  were	
  due	
  to	
  improvements	
  in	
  lodging	
  trends	
  
in	
  the	
  markets	
  in	
  which	
  our	
  hotels	
  are	
  located.	
  

Expenses	
  

Total	
  hotel	
  operating	
  expenses	
  increased	
  20.6%	
  to	
  approximately	
  $227,324	
  for	
  the	
  year	
  ended	
  December	
  

31,	
  2014	
  from	
  $188,431	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  Consistent	
  with	
  the	
  increase	
  in	
  hotel	
  operating	
  
revenues,	
  hotel	
  operating	
  expenses	
  increased	
  primarily	
  due	
  to	
  the	
  acquisitions	
  consummated	
  since	
  the	
  
comparable	
  period	
  in	
  2013,	
  as	
  mentioned	
  above.	
  The	
  acquisitions	
  also	
  resulted	
  in	
  an	
  increase	
  in	
  depreciation	
  and	
  
amortization	
  of	
  24.0%,	
  or	
  $13,383,	
  to	
  $69,167	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  from	
  $55,784	
  for	
  the	
  year	
  
ended	
  December	
  31,	
  2013.	
  Real	
  estate	
  and	
  personal	
  property	
  tax	
  and	
  property	
  insurance	
  increased	
  $6,259,	
  or	
  
26.0%,	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2013	
  due	
  to	
  our	
  acquisitions	
  

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annual report 2014 

along	
  with	
  a	
  general	
  overall	
  increase	
  in	
  tax	
  assessments	
  and	
  tax	
  rates	
  as	
  the	
  economy	
  improves,	
  but	
  was	
  partially	
  
offset	
  by	
  reductions	
  resulting	
  from	
  our	
  rigorous	
  management	
  of	
  this	
  expense.	
  

General	
  and	
  administrative	
  expense	
  decreased	
  by	
  approximately	
  $3,506	
  from	
  $23,869	
  in	
  2013	
  to	
  $20,363	
  
in	
  2014.	
  General	
  and	
  administrative	
  expense	
  includes	
  expense	
  related	
  to	
  non-‐cash	
  share	
  based	
  payments	
  issued	
  as	
  
incentive	
  compensation	
  to	
  the	
  Company’s	
  trustees,	
  executives,	
  and	
  employees.	
   	
   Expense	
  related	
  to	
  share	
  based	
  
compensation	
  decreased	
  $3,718	
  when	
  comparing	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  to	
  the	
  same	
  period	
  in	
  2013.	
  
This	
  decrease	
  in	
  share	
  based	
  compensation	
  expense	
  is	
  due	
  primarily	
  to	
  the	
  vesting	
  of	
  the	
  2010	
  Multi-‐Year	
  LTIP	
  Plan	
  
as	
  of	
  December	
  31,	
  2013	
  as	
  well	
  as	
  a	
  lesser	
  amount	
  of	
  restricted	
  shares	
  issued	
  since	
  December	
  31,	
  2013.	
   	
   Please	
  
refer	
  to	
  “Note	
  8	
  –	
  Share	
  Based	
  Payments”	
  of	
  the	
  notes	
  to	
  the	
  consolidated	
  financial	
  statements	
  for	
  more	
  
information	
  about	
  our	
  stock	
  based	
  compensation.	
   	
  

Amounts	
  recorded	
  on	
  our	
  consolidated	
  statement	
  of	
  operations	
  for	
  acquisition	
  and	
  terminated	
  
transactions	
  costs	
  will	
  fluctuate	
  from	
  period	
  to	
  period	
  based	
  on	
  our	
  acquisition	
  activities.	
  Acquisition	
  costs	
  typically	
  
consist	
  of	
  transfer	
  taxes,	
  legal	
  fees	
  and	
  other	
  costs	
  associated	
  with	
  acquiring	
  a	
  hotel	
  property	
  and	
  transactions	
  that	
  
were	
  terminated	
  during	
  the	
  year.	
  Acquisition	
  and	
  terminated	
  transaction	
  costs	
  increased	
  $1,498	
  from	
  $974	
  for	
  the	
  
year	
  ended	
  December	
  31,	
  2013	
  to	
  $2,472	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014.	
   	
   While	
  we	
  acquired	
  more	
  
properties	
  in	
  2013,	
  the	
  manner	
  in	
  which	
  acquisition	
  targets	
  are	
  found	
  can	
  and	
  do	
  dictate	
  the	
  costs	
  necessary	
  to	
  
complete	
  the	
  acquisition.	
   	
   The	
  costs	
  incurred	
  in	
  2014	
  were	
  related	
  to	
  the	
  following	
  hotels:	
  $1,836	
  related	
  to	
  our	
  
Hilton	
  Garden	
  Inn	
  52nd	
  Street	
  acquisition,	
  $173	
  related	
  to	
  our	
  Hotel	
  Milo	
  acquisition,	
  and	
  $169	
  related	
  to	
  our	
  Parrot	
  
Key	
  Resort	
  acquisition.	
  The	
  costs	
  incurred	
  in	
  2013	
  were	
  related	
  to	
  the	
  following	
  hotels:	
  $500	
  related	
  to	
  our	
  Hyatt	
  
Union	
  Square	
  acquisition;	
  $152	
  related	
  to	
  our	
  Residence	
  Inn	
  Coconut	
  Grove	
  acquisition;	
  $65	
  related	
  to	
  our	
  
Courtyard	
  San	
  Diego	
  acquisition;	
  and	
  $138	
  for	
  our	
  Winter	
  Haven	
  and	
  Blue	
  Moon	
  Hotel	
  acquisitions.	
  Also	
  included	
  in	
  
these	
  costs	
  are	
  charges	
  related	
  to	
  transactions	
  that	
  were	
  terminated	
  during	
  the	
  year.	
  

Operating	
  Income	
  

Operating	
  income	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  $67,909	
  compared	
  to	
  operating	
  income	
  of	
  

$44,690	
  during	
  the	
  same	
  period	
  in	
  2013.	
  Operating	
  income	
  was	
  positively	
  impacted	
  by	
  the	
  improved	
  operating	
  
results	
  of	
  our	
  hotels	
  discussed	
  above	
  as	
  well	
  as	
  insurance	
  recoveries	
  of	
  $4,604,	
  much	
  of	
  which	
  represents	
  
settlement	
  of	
  business	
  interruption	
  insurance	
  claims	
  that	
  arose	
  from	
  the	
  Hurricane	
  Sandy	
  natural	
  disaster	
  in	
  2012.	
  

Interest	
  Expense	
  

Interest	
  expense	
  increased	
  $2,422	
  from	
  $40,935	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  to	
  $43,357	
  for	
  the	
  
year	
  ended	
  December	
  31,	
  2014.	
  The	
  increase	
  in	
  interest	
  expense	
  is	
  primarily	
  due	
  to	
  increased	
  borrowings	
  drawn	
  on	
  our	
  
unsecured	
  credit	
  facilities.	
   	
   During	
  2014,	
  we	
  entered	
  into	
  a	
  new	
  credit	
  facility	
  which	
  allowed	
  for	
  an	
  additional	
  $100,000	
  
in	
  unsecured	
  term	
  loan,	
  which	
  we	
  drew	
  during	
  the	
  second	
  quarter	
  of	
  2014.	
  

Gain	
  on	
  Disposition	
  of	
  Hotel	
  Properties	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  the	
  Company	
  recorded	
  a	
  gain	
  of	
  $7,195	
  related	
  to	
  its	
  sale	
  of	
  

Hotel	
  373	
  in	
  Manhattan.	
  

Gain	
  on	
  Hotel	
  Acquisitions,	
  net	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  the	
  Company	
  recorded	
  a	
  net	
  gain	
  of	
  $12,667	
  related	
  primarily	
  

to	
  its	
  purchase	
  of	
  the	
  Hilton	
  Garden	
  Inn	
  on	
  52nd	
  Street	
  in	
  Manhattan	
  as	
  the	
  purchase	
  price	
  of	
  the	
  asset	
  was	
  less	
  
than	
  the	
  appraised	
  fair	
  value	
  as	
  of	
  the	
  closing	
  date.	
  During	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  the	
  company	
  had	
  
recorded	
  a	
  similar	
  net	
  gain	
  of	
  $12,096	
  related	
  to	
  its	
  purchase	
  of	
  Hyatt	
  Union	
  Square.	
  

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hersha hospitality trust 

Development	
  Loan	
  Recovery	
  

Consideration	
  given	
  in	
  exchange	
  for	
  the	
  Hilton	
  Garden	
  Inn	
  52nd	
  Street	
  included	
  cash	
  to	
  the	
  seller	
  and	
  our	
  

reinstatement	
  and	
  cancellation	
  of	
  a	
  development	
  loan	
  receivable	
  in	
  the	
  original	
  principal	
  amount	
  of	
  $10,000	
  and	
  
$12,494	
  of	
  accrued	
  interest	
  and	
  late	
  fees.	
  This	
  development	
  loan	
  receivable	
  had	
  previously	
  been	
  fully	
  impaired	
  in	
  
2009,	
  but	
  was	
  recovered	
  as	
  part	
  of	
  this	
  acquisition.	
  As	
  a	
  result,	
  we	
  recognized	
  a	
  gain	
  of	
  $22,494	
  on	
  the	
  recovery	
  of	
  
the	
  previously	
  impaired	
  development	
  loan.	
  

Unconsolidated	
  Joint	
  Venture	
  Investments	
  

The	
  loss	
  from	
  unconsolidated	
  joint	
  ventures	
  consists	
  of	
  our	
  interest	
  in	
  the	
  operating	
  results	
  of	
  the	
  
properties	
  we	
  own	
  in	
  joint	
  ventures.	
  The	
  operating	
  results	
  of	
  the	
  unconsolidated	
  joint	
  ventures	
  improved	
  by	
  $715	
  
for	
  the	
  year	
  ended	
  December	
  31,	
  2014.	
  This	
  is	
  primarily	
  because	
  of	
  the	
  improved	
  performance	
  in	
  our	
  Boston	
  
market,	
  where	
  two	
  of	
  our	
  five	
  properties	
  owned	
  in	
  joint	
  ventures	
  are	
  located.	
   	
  

We	
  recorded	
  an	
  impairment	
  loss	
  of	
  $1,813	
  related	
  to	
  the	
  Courtyard,	
  Norwich,	
  CT,	
  one	
  of	
  the	
  properties	
  

owned	
  by	
  Mystic	
  Partners,	
  LLC	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
   	
   At	
  that	
  time,	
  we	
  did	
  not	
  anticipate	
  
recovering	
  our	
  investment	
  balance	
  in	
  this	
  asset,	
  and	
  as	
  such	
  we	
  reduced	
  our	
  investment	
  attributed	
  to	
  this	
  property	
  
to	
  $0	
  as	
  of	
  December	
  31,	
  2013.	
   	
   During	
  the	
  third	
  quarter	
  of	
  2014,	
  the	
  title	
  on	
  this	
  property	
  was	
  transferred	
  to	
  the	
  
lender.	
  

Income	
  Tax	
  Benefit	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  the	
  Company	
  recorded	
  an	
  income	
  tax	
  benefit	
  of	
  $2,685	
  
compared	
  to	
  an	
  income	
  tax	
  benefit	
  of	
  $5,600	
  in	
  2013.	
  Prior	
  year	
  income	
  tax	
  benefit	
  included	
  the	
  reversal	
  of	
  
allowances	
  against	
  state	
  deferred	
  tax	
  assets	
  resulting	
  from	
  cumulative	
  net	
  operating	
  losses	
  that	
  were	
  deemed	
  to	
  
be	
  realizable	
  based	
  on	
  projections	
  of	
  future	
  performance	
  of	
  the	
  hotels	
  generating	
  these	
  net	
  operating	
  losses.	
  

Discontinued	
  Operations	
  

On	
  September	
  20,	
  2013,	
  the	
  Company	
  entered	
  into	
  a	
  purchase	
  and	
  sale	
  agreement	
  to	
  sell	
  a	
  portfolio	
  of	
  16	
  

non-‐core	
  hotels	
  for	
  an	
  aggregate	
  purchase	
  price	
  of	
  approximately	
  $217,000.	
  During	
  the	
  third	
  quarter	
  of	
  2013,	
  the	
  
Company	
  had	
  recorded	
  an	
  impairment	
  of	
  $6,591	
  in	
  connection	
  with	
  the	
  anticipated	
  disposition.	
  As	
  of	
  December	
  
31,	
  2013,	
  the	
  Company	
  had	
  closed	
  on	
  the	
  sale	
  of	
  12	
  of	
  the	
  hotels,	
  with	
  the	
  remaining	
  four	
  hotels	
  closing	
  during	
  the	
  
first	
  quarter	
  of	
  2014.	
  Accordingly,	
  a	
  gain	
  of	
  $31,559	
  was	
  recognized	
  during	
  the	
  fourth	
  quarter	
  of	
  2013	
  as	
  the	
  
proceeds	
  from	
  the	
  sale	
  exceeded	
  the	
  carrying	
  value.	
  

For	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  the	
  Company	
  recorded	
  a	
  loss	
  of	
  $128	
  in	
  connection	
  with	
  the	
  

closing	
  of	
  the	
  remaining	
  4	
  properties.	
  In	
  addition,	
  we	
  recorded	
  an	
  impairment	
  loss	
  of	
  $1,800	
  in	
  the	
  first	
  quarter	
  of	
  
2014,	
  as	
  the	
  proceeds	
  did	
  not	
  exceed	
  the	
  carrying	
  value	
  for	
  certain	
  of	
  these	
  properties.	
   	
  

On	
  June	
  12,	
  2013,	
  we	
  closed	
  on	
  the	
  sale	
  of	
  our	
  Comfort	
  Inn,	
  Harrisburg,	
  PA.	
  The	
  Company	
  sold	
  the	
  hotel	
  

for	
  $3,700	
  and	
  recorded	
  a	
  gain	
  on	
  sale	
  of	
  $442.	
  Additionally,	
  on	
  September	
  17,	
  2013,	
  we	
  closed	
  on	
  the	
  sale	
  of	
  
Holiday	
  Inn	
  Express	
  Camp	
  Springs,	
  MD	
  property.	
  The	
  Company	
  sold	
  the	
  hotel	
  for	
  $8,500	
  and	
  recorded	
  a	
  gain	
  on	
  the	
  
sale	
  of	
  $120	
  and	
  an	
  impairment	
  charge	
  of	
  $3,723	
  during	
  the	
  second	
  quarter	
  of	
  2013	
  as	
  the	
  anticipated	
  net	
  
proceeds	
  did	
  not	
  exceed	
  the	
  carrying	
  value.	
  

The	
  operating	
  results	
  for	
  all	
  18	
  of	
  the	
  above	
  described	
  hotel	
  properties	
  and	
  one	
  land	
  parcel	
  have	
  been	
  
reclassified	
  to	
  discontinued	
  operations	
  in	
  the	
  statement	
  of	
  operations	
  for	
  the	
  years	
  end	
  December	
  31,	
  2014	
  and	
  
2013,	
  respectively.	
  

19 

	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

We	
  recorded	
  income	
  from	
  discontinued	
  operations	
  of	
  approximately	
  $263	
  during	
  the	
  twelve	
  months	
  

ended	
  December	
  31,	
  2014,	
  compared	
  to	
  income	
  of	
  approximately	
  $7,388	
  during	
  the	
  twelve	
  months	
  ended	
  
December	
  31,	
  2013.	
  See	
  “Note	
  12	
  –	
  Discontinued	
  Operations”	
  for	
  more	
  information.	
  

Effective	
  January	
  1,	
  2014,	
  we	
  early	
  adopted	
  ASU	
  Update	
  No.	
  2014-‐08	
  concerning	
  the	
  classification	
  and	
  

reporting	
  of	
  discontinued	
  operations.	
  This	
  amendment	
  defines	
  discontinued	
  operations	
  as	
  a	
  component	
  of	
  an	
  
entity	
  that	
  represents	
  a	
  strategic	
  shift	
  that	
  has	
  (or	
  will	
  have)	
  a	
  major	
  effect	
  on	
  an	
  entity’s	
  operations	
  and	
  financial	
  
results.	
  As	
  a	
  result	
  of	
  the	
  early	
  adoption	
  of	
  ASU	
  Update	
  No.	
  2014-‐08,	
  we	
  anticipate	
  that	
  most	
  of	
  our	
  hotel	
  
dispositions	
  will	
  not	
  be	
  classified	
  as	
  discontinued	
  operations	
  as	
  most	
  will	
  not	
  fit	
  this	
  definition.	
  

Net	
  Income	
  Applicable	
  to	
  Common	
  Shareholders	
  

Net	
  income	
  applicable	
  to	
  common	
  shareholders	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  $52,899	
  

compared	
  to	
  net	
  income	
  applicable	
  to	
  common	
  shareholders	
  of	
  $32,752	
  for	
  the	
  same	
  period	
  in	
  2013.	
  Net	
  income	
  
applicable	
  to	
  common	
  shareholders	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  positively	
  impacted	
  by	
  the	
  improved	
  
operating	
  results	
  of	
  our	
  hotels	
  and	
  one-‐time	
  gains	
  discussed	
  above.	
  Net	
  income	
  applicable	
  to	
  common	
  shareholders	
  for	
  
the	
  year	
  ended	
  December	
  31,	
  2013	
  was	
  negatively	
  impacted	
  by	
  the	
  extinguishment	
  of	
  $2,250	
  of	
  issuance	
  costs	
  
associated	
  with	
  the	
  redemption	
  of	
  all	
  of	
  our	
  outstanding	
  Series	
  A	
  Preferred	
  Shares.	
  

Comprehensive	
  Income	
  Attributable	
  to	
  Common	
  Shareholders	
  

Comprehensive	
  income	
  applicable	
  to	
  common	
  shareholders	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  
$52,917	
  compared	
  to	
  $34,162	
  for	
  the	
  same	
  period	
  in	
  2013.	
  This	
  amount	
  was	
  primarily	
  attributable	
  to	
  net	
  income	
  
as	
  more	
  fully	
  described	
  above.	
  Further	
  change	
  in	
  other	
  comprehensive	
  income	
  was	
  primarily	
  the	
  result	
  of	
  the	
  
positive	
  shift	
  in	
  the	
  position	
  of	
  the	
  fair	
  value	
  of	
  our	
  derivative	
  instruments.	
  For	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  
we	
  recorded	
  other	
  comprehensive	
  income	
  of	
  $68,289	
  when	
  compared	
  to	
  $51,358	
  of	
  other	
  comprehensive	
  income	
  
for	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  The	
  expected	
  rise	
  in	
  the	
  interest	
  rate	
  yield	
  curve	
  in	
  the	
  next	
  few	
  years	
  has	
  
continued	
  to	
  increase	
  the	
  fair	
  value	
  of	
  our	
  interest	
  rate	
  swaps,	
  increasing	
  the	
  asset	
  value	
  of	
  certain	
  derivative	
  
instruments	
  and	
  decreasing	
  the	
  liability	
  of	
  shifting	
  the	
  liability	
  to	
  an	
  asset	
  position	
  for	
  other	
  derivative	
  instruments.	
  

COMPARISON	
  OF	
  THE	
  YEAR	
  ENDED	
  DECEMBER	
  31,	
  2013	
  TO	
  DECEMBER	
  31,	
  2012	
  

(dollars	
  in	
  thousands,	
  except	
  per	
  share	
  data)	
  

Revenue	
  

Our	
  total	
  revenues	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2013	
  and	
  2012	
  consisted	
  of	
  hotel	
  operating	
  
revenues,	
  interest	
  income	
  from	
  our	
  development	
  loan	
  program	
  and	
  other	
  revenue.	
  Hotel	
  operating	
  revenues	
  were	
  
approximately	
  99.9%	
  and	
  99.3%	
  of	
  total	
  revenues	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2013	
  and	
  2012,	
  respectively.	
  
Hotel	
  operating	
  revenues	
  are	
  recorded	
  for	
  wholly	
  owned	
  hotels	
  that	
  are	
  leased	
  to	
  our	
  wholly	
  owned	
  TRS	
  and	
  
hotels	
  owned	
  through	
  joint	
  venture	
  interests	
  that	
  were	
  consolidated	
  in	
  our	
  financial	
  statements	
  during	
  the	
  period.	
  
Hotel	
  operating	
  revenues	
  increased	
  $39,059,	
  or	
  13.1%,	
  from	
  $299,005	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012	
  to	
  
$338,064	
  for	
  the	
  same	
  period	
  in	
  2013.	
  This	
  increase	
  in	
  hotel	
  operating	
  revenues	
  was	
  primarily	
  attributable	
  to	
  the	
  
acquisitions	
  consummated	
  in	
  2013	
  and	
  2012	
  as	
  well	
  as	
  increases	
  in	
  hotel	
  operating	
  revenues	
  for	
  our	
  same	
  store	
  
consolidated	
  hotels.	
   	
  

20 

	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

We	
  acquired	
  interests	
  in	
  the	
  following	
  consolidated	
  hotels	
  that	
  contributed	
  the	
  following	
  operating	
  

revenues	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013:	
  

Brand	
  

Location	
  

Hyatt	
  Union	
  Square	
  

Courtyard	
  by	
  Marriott	
  

	
   New	
  York,	
  NY	
  

	
   San	
  Diego,	
  CA	
  

	
   Acquisition	
  Date	
  
	
   April	
  9,	
  2013	
  

	
   May	
  30,	
  2013	
  

Residence	
  Inn	
  

Winter	
  Haven	
  

Blue	
  Moon	
  

	
   Coconut	
  Grove,	
  FL	
  

June	
  12,	
  2013	
  

	
   Miami,	
  FL	
  

	
   Miami,	
  FL	
  

	
   December	
  20,	
  2013	
  

	
   December	
  20,	
  2013	
  

	
   Rooms	
  

2013	
  Hotel	
  Operating	
  
Revenues	
  

	
   178	
  	
  	
   $	
  
	
   245	
  	
  	
  
	
   140	
  	
  	
  
	
   70	
  	
  	
  
	
   75	
  	
  	
  
	
   708	
  	
   $	
  

	
   11,272	
  	
  

	
   8,350	
  	
  

	
   2,889	
  	
  

	
   203	
  	
  

	
   175	
  	
  
	
   22,889	
  

Revenues	
  for	
  all	
  hotels	
  were	
  recorded	
  from	
  the	
  date	
  of	
  acquisition	
  as	
  hotel	
  operating	
  revenues.	
  Further,	
  
hotel	
  operating	
  revenues	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  included	
  revenues	
  for	
  the	
  following	
  hotels	
  that	
  
were	
  purchased	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  Hotels	
  acquired	
  during	
  the	
  year	
  ended	
  December	
  31,	
  
2012	
  would	
  have	
  a	
  full	
  year	
  of	
  results	
  included	
  in	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  but	
  not	
  necessarily	
  a	
  full	
  year	
  
of	
  results	
  during	
  the	
  same	
  period	
  in	
  2012.	
  We	
  acquired	
  interests	
  in	
  the	
  following	
  consolidated	
  hotels	
  during	
  the	
  
year	
  ended	
  December	
  31,	
  2012:	
  

Brand	
  

Location	
  

	
   Acquisition	
  Date	
  

	
  Rooms	
  	
  

2013	
  Hotel	
  
Operating	
  
Revenues	
  

2012	
  Hotel	
  
Operating	
  
Revenues	
  

Rittenhouse	
  Hotel	
  

	
   Philadelphia,	
  PA	
  

	
   March	
  1,	
  2012	
  

	
   116	
  	
   $	
  

	
   16,969	
  	
   $	
  

The	
  Boxer	
  

	
   Boston,	
  MA	
  

	
   May	
  7,	
  2012	
  

Holiday	
  Inn	
  Express	
   	
   New	
  York,	
  NY	
  

	
   June	
  18,	
  2012	
  

	
   80	
  	
   	
  

	
   228	
  	
   	
  

	
   3,799	
  	
   	
  

	
   16,746	
  	
   	
  

	
   424	
  	
   $	
  

	
   37,514	
  	
   $	
  

	
   16,809	
  

	
   2,791	
  

	
   10,170	
  

	
   29,770	
  

In	
  addition,	
  our	
  same	
  store	
  consolidated	
  portfolio	
  experienced	
  improvements	
  in	
  ADR	
  and	
  occupancy	
  

during	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2012.	
  Occupancy	
  in	
  our	
  same	
  
store	
  consolidated	
  hotels	
  increased	
  190	
  basis	
  points	
  from	
  78.6%	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2012	
  to	
  
80.5%	
  for	
  the	
  same	
  period	
  in	
  2013.	
  ADR	
  improved	
  1.1%,	
  increasing	
  from	
  $172.67	
  for	
  the	
  year	
  ended	
  December	
  31,	
  
2012	
  to	
  $174.65	
  during	
  the	
  same	
  period	
  in	
  2013.	
  These	
  improvements	
  were	
  due	
  to	
  improvements	
  in	
  lodging	
  trends	
  
in	
  the	
  markets	
  in	
  which	
  our	
  hotels	
  are	
  located.	
  

We	
  had	
  previously	
  invested	
  in	
  hotel	
  development	
  projects	
  by	
  providing	
  mortgage	
  or	
  mezzanine	
  financing	
  

to	
  hotel	
  developers	
  and	
  through	
  the	
  acquisition	
  of	
  land	
  that	
  is	
  then	
  leased	
  to	
  hotel	
  developers.	
  Interest	
  income	
  
from	
  development	
  loans	
  receivable	
  was	
  $158	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  compared	
  to	
  $1,998	
  for	
  the	
  
same	
  period	
  in	
  2012.	
  

In	
  April	
  2013,	
  we	
  acquired	
  the	
  Hyatt	
  Union	
  Square	
  and	
  as	
  part	
  of	
  the	
  consideration	
  we	
  agreed	
  to	
  cancel	
  

the	
  $13,303	
  development	
  loan	
  receivable	
  in	
  its	
  entirety.	
  Furthermore,	
  the	
  only	
  remaining	
  development	
  loan,	
  
related	
  to	
  the	
  Hyatt	
  48Lex,	
  was	
  paid	
  off	
  in	
  full	
  during	
  April	
  2013.	
  As	
  of	
  December	
  31,	
  2013,	
  we	
  had	
  no	
  outstanding	
  
development	
  loans	
  receivable.	
  

Expenses	
  

Total	
  hotel	
  operating	
  expenses	
  increased	
  16.3%	
  to	
  approximately	
  $188,431	
  for	
  the	
  year	
  ended	
  December	
  

31,	
  2013	
  from	
  $161,982	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  Consistent	
  with	
  the	
  increase	
  in	
  hotel	
  operating	
  
revenues,	
  hotel	
  operating	
  expenses	
  increased	
  primarily	
  due	
  to	
  the	
  acquisitions	
  consummated	
  since	
  the	
  
comparable	
  period	
  in	
  2012,	
  as	
  mentioned	
  above.	
  The	
  acquisitions	
  also	
  resulted	
  in	
  an	
  increase	
  in	
  depreciation	
  and	
  

21 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
annual report 2014 

amortization	
  of	
  15.6%,	
  or	
  $7,541,	
  to	
  $55,784	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  from	
  $48,243	
  for	
  the	
  year	
  
ended	
  December	
  31,	
  2012.	
  Real	
  estate	
  and	
  personal	
  property	
  tax	
  and	
  property	
  insurance	
  increased	
  $4,742,	
  or	
  
24.5%,	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2012	
  due	
  to	
  our	
  acquisitions	
  
along	
  with	
  a	
  general	
  overall	
  increase	
  in	
  tax	
  assessments	
  and	
  tax	
  rates	
  as	
  the	
  economy	
  improves.	
  

General	
  and	
  administrative	
  expense	
  increased	
  by	
  approximately	
  $492	
  from	
  $23,377	
  in	
  2012	
  to	
  $23,869	
  in	
  

2013.	
  Increases	
  in	
  other	
  general	
  and	
  administrative	
  expenses	
  were	
  primarily	
  from	
  increases	
  in	
  employee	
  
headcount	
  and	
  resulting	
  base	
  compensation	
  and	
  payroll	
  taxes	
  increases.	
  General	
  and	
  administrative	
  expense	
  
includes	
  expense	
  related	
  to	
  non-‐cash	
  share	
  based	
  payments	
  issued	
  as	
  incentive	
  compensation	
  to	
  the	
  Company’s	
  
trustees,	
  executives,	
  and	
  employees.	
  Expense	
  related	
  to	
  share	
  based	
  compensation	
  increased	
  $68	
  during	
  the	
  year	
  
ended	
  December	
  31,	
  2013	
  when	
  compared	
  to	
  the	
  same	
  period	
  of	
  2012.	
  Please	
  refer	
  to	
  “Note	
  8	
  –	
  Share	
  Based	
  
Payments”	
  of	
  the	
  notes	
  to	
  the	
  consolidated	
  financial	
  statements	
  for	
  more	
  information	
  about	
  our	
  stock	
  based	
  
compensation.	
   	
  

Amounts	
  recorded	
  on	
  our	
  consolidated	
  statement	
  of	
  operations	
  for	
  acquisition	
  and	
  terminated	
  
transactions	
  costs	
  will	
  fluctuate	
  from	
  period	
  to	
  period	
  based	
  on	
  our	
  acquisition	
  activities.	
  Acquisition	
  costs	
  typically	
  
consist	
  of	
  transfer	
  taxes,	
  legal	
  fees	
  and	
  other	
  costs	
  associated	
  with	
  acquiring	
  a	
  hotel	
  property	
  and	
  transactions	
  that	
  
were	
  terminated	
  during	
  the	
  year.	
  Acquisition	
  and	
  terminated	
  transaction	
  costs	
  decreased	
  $205	
  from	
  $1,179	
  for	
  the	
  
year	
  ended	
  December	
  31,	
  2012	
  to	
  $974	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  While	
  we	
  acquired	
  more	
  
properties	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2012,	
  the	
  manner	
  in	
  
which	
  acquisition	
  targets	
  are	
  found	
  can	
  and	
  do	
  dictate	
  the	
  costs	
  necessary	
  to	
  complete	
  the	
  acquisition.	
  The	
  costs	
  
incurred	
  in	
  2013	
  were	
  related	
  to	
  the	
  following	
  hotels:	
  $500	
  related	
  to	
  our	
  Hyatt	
  Union	
  Square	
  acquisition;	
  $152	
  
related	
  to	
  our	
  Residence	
  Inn	
  Coconut	
  Grove	
  acquisition;	
  $65	
  related	
  to	
  our	
  Courtyard	
  San	
  Diego	
  acquisition;	
  and	
  
$138	
  for	
  our	
  Winter	
  Haven	
  and	
  Blue	
  Moon	
  Hotel	
  acquisitions.	
  The	
  costs	
  incurred	
  in	
  2012	
  were	
  related	
  to	
  following	
  
hotels:	
  $963	
  related	
  to	
  our	
  acquisition	
  of	
  The	
  Rittenhouse	
  Hotel;	
  $61	
  related	
  to	
  acquisition	
  of	
  The	
  Boxer;	
  $67	
  
related	
  to	
  our	
  acquisition	
  of	
  Holiday	
  Inn	
  Express	
  Manhattan.	
  The	
  remaining	
  costs	
  were	
  primarily	
  related	
  to	
  
transactions	
  that	
  were	
  terminated	
  during	
  the	
  year.	
  

Operating	
  Income	
  

Operating	
  income	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  was	
  $44,690	
  compared	
  to	
  operating	
  income	
  of	
  
$46,258	
  during	
  the	
  same	
  period	
  in	
  2012.	
  As	
  noted	
  above,	
  the	
  decrease	
  in	
  operating	
  income	
  resulted	
  partially	
  from	
  
improved	
  performance	
  of	
  our	
  portfolio	
  and	
  acquisitions	
  that	
  have	
  occurred	
  since	
  the	
  beginning	
  of	
  2012,	
  but	
  is	
  
offset	
  by	
  increases	
  in	
  real	
  estate	
  taxes.	
   	
  

Interest	
  Expense	
  

Interest	
  expense	
  increased	
  $2,865	
  from	
  $38,070	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012	
  to	
  $40,935	
  for	
  the	
  

year	
  ended	
  December	
  31,	
  2013.	
  The	
  increase	
  in	
  interest	
  expense	
  is	
  due	
  primarily	
  to	
  an	
  increase	
  in	
  borrowings	
  
drawn	
  on	
  our	
  senior	
  unsecured	
  term	
  loan	
  and	
  our	
  line	
  of	
  credit	
  throughout	
  the	
  year.	
  A	
  portion	
  of	
  these	
  borrowings	
  
were	
  used	
  to	
  repay	
  various	
  mortgage	
  loans,	
  which	
  lowered	
  our	
  overall	
  consolidated	
  secured	
  mortgage	
  
indebtedness	
  outstanding.	
  Additionally,	
  we	
  used	
  proceeds	
  from	
  the	
  line	
  of	
  credit	
  to	
  fund	
  the	
  purchase	
  of	
  our	
  
Residence	
  Inn	
  Coconut	
  Grove	
  and	
  Courtyard	
  San	
  Diego	
  acquisitions.	
   	
   Finally,	
  we	
  financed	
  a	
  portion	
  of	
  our	
  Hyatt	
  
Union	
  Square	
  acquisition	
  with	
  variable	
  rate	
  mortgage	
  debt	
  and	
  borrowed	
  an	
  additional	
  $10,000	
  to	
  fund	
  
construction	
  of	
  the	
  tower	
  at	
  our	
  Courtyard	
  Miami	
  Beach	
  hotel.	
   	
   	
  

Unconsolidated	
  Joint	
  Venture	
  Investments	
  

The	
  loss	
  from	
  unconsolidated	
  joint	
  ventures	
  consists	
  of	
  our	
  interest	
  in	
  the	
  operating	
  results	
  of	
  the	
  
properties	
  we	
  own	
  in	
  joint	
  ventures.	
  The	
  operating	
  results	
  of	
  the	
  unconsolidated	
  joint	
  ventures	
  improved	
  by	
  $210	
  
for	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
   	
  

Since	
  the	
  beginning	
  of	
  2012,	
  we	
  have	
  made	
  efforts	
  to	
  decrease	
  our	
  investment	
  in	
  unconsolidated	
  joint	
  

ventures	
  resulting	
  in	
  the	
  sale	
  of	
  5	
  of	
  these	
  assets	
  to	
  third	
  parties	
  and	
  the	
  purchase	
  of	
  the	
  remaining	
  50%	
  interest	
  in	
  

22 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
hersha hospitality trust 

our	
  Holiday	
  Inn	
  Express,	
  New	
  York,	
  NY	
  hotel	
  on	
  June	
  18,	
  2012.	
  Accordingly,	
  the	
  results	
  of	
  this	
  hotel	
  are	
  now	
  
included	
  in	
  our	
  consolidated	
  results	
  and	
  our	
  interest	
  in	
  Metro	
  29th	
  was	
  remeasured.	
  As	
  a	
  result,	
  during	
  the	
  year	
  
ended	
  December	
  31,	
  2012,	
  we	
  recorded	
  a	
  loss	
  from	
  the	
  remeasurement	
  of	
  our	
  investments	
  in	
  the	
  unconsolidated	
  
joint	
  venture	
  of	
  approximately	
  $224.	
   	
   	
  

On	
  August	
  13,	
  2012,	
  the	
  Company	
  purchased	
  the	
  remaining	
  50%	
  ownership	
  interest	
  in	
  Inn	
  America	
  

Hospitality	
  at	
  Ewing,	
  the	
  lessee	
  of	
  the	
  Courtyard	
  by	
  Marriot,	
  Ewing,	
  NJ.	
  As	
  such,	
  we	
  ceased	
  to	
  account	
  for	
  our	
  
investment	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing	
  under	
  the	
  equity	
  method	
  of	
  accounting	
  as	
  of	
  August	
  10,	
  2012	
  
because	
  it	
  became	
  a	
  consolidated	
  subsidiary.	
  Our	
  interest	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing,	
  which	
  consisted	
  of	
  
our	
  investment	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing	
  and	
  a	
  receivable,	
  was	
  remeasured	
  and	
  as	
  a	
  result	
  based	
  on	
  the	
  
appraised	
  value	
  of	
  the	
  hotel,	
  we	
  recorded	
  a	
  loss	
  from	
  the	
  remeasurement	
  of	
  our	
  investments	
  in	
  the	
  
unconsolidated	
  joint	
  venture	
  of	
  approximately	
  $1,668	
  during	
  the	
  twelve	
  months	
  ended	
  December	
  31,	
  2012.	
  

We	
  recorded	
  an	
  impairment	
  loss	
  of	
  $1,813	
  related	
  to	
  the	
  Courtyard,	
  Norwich,	
  CT,	
  one	
  of	
  the	
  properties	
  

owned	
  by	
  Mystic	
  Partners,	
  LLC	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  At	
  that	
  time,	
  we	
  did	
  not	
  anticipate	
  
recovering	
  our	
  investment	
  balance	
  in	
  this	
  asset,	
  and	
  as	
  such	
  we	
  reduced	
  our	
  investment	
  attributed	
  to	
  this	
  property	
  
to	
  $0	
  as	
  of	
  December	
  31,	
  2013.	
   	
   Mystic	
  Partners,	
  LLC	
  transferred	
  title	
  to	
  the	
  property	
  to	
  the	
  lender	
  in	
  the	
  third	
  
quarter	
  of	
  2014.	
  

Income	
  Tax	
  Benefit	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  the	
  Company	
  recorded	
  an	
  income	
  tax	
  benefit	
  of	
  $5,600	
  
compared	
  an	
  income	
  tax	
  benefit	
  of	
  $3,355	
  in	
  2012.	
  Excluded	
  from	
  the	
  income	
  tax	
  benefit	
  for	
  2013	
  is	
  $190	
  of	
  
income	
  tax	
  expense	
  related	
  to	
  discontinued	
  operations.	
  Approximately	
  $2,866	
  of	
  the	
  income	
  tax	
  benefit	
  relates	
  to	
  
deferred	
  tax	
  assets	
  that	
  the	
  Company	
  now	
  believes	
  are	
  realizable	
  and	
  variances	
  between	
  the	
  tax	
  return	
  and	
  year	
  
end	
  provision	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  The	
  remaining	
  income	
  tax	
  benefit	
  is	
  a	
  result	
  of	
  the	
  
operations	
  of	
  the	
  Company’s	
  taxable	
  REIT	
  subsidiary,	
  44	
  New	
  England.	
  

Discontinued	
  Operations	
  

On	
  September	
  20,	
  2013,	
  the	
  Company	
  entered	
  into	
  a	
  purchase	
  and	
  sale	
  agreement	
  to	
  sell	
  a	
  portfolio	
  of	
  16	
  

non-‐core	
  hotels	
  for	
  an	
  aggregate	
  purchase	
  price	
  of	
  approximately	
  $217,000.	
  During	
  the	
  third	
  quarter	
  of	
  2013,	
  the	
  
Company	
  had	
  recorded	
  an	
  impairment	
  of	
  $6,591	
  in	
  connection	
  with	
  the	
  anticipated	
  disposition.	
  As	
  of	
  December	
  
31,	
  2013,	
  the	
  Company	
  had	
  closed	
  on	
  the	
  sale	
  of	
  12	
  of	
  the	
  hotels.	
  Accordingly,	
  a	
  gain	
  of	
  $31,559	
  was	
  recognized	
  
during	
  the	
  fourth	
  quarter	
  of	
  2013	
  as	
  the	
  proceeds	
  from	
  the	
  sale	
  exceeded	
  the	
  carrying	
  value.	
  The	
  Company	
  closed	
  
on	
  the	
  remaining	
  four	
  non-‐core	
  hotels	
  during	
  the	
  first	
  quarter	
  of	
  2014.	
  

On	
  June	
  12,	
  2013,	
  we	
  closed	
  on	
  the	
  sale	
  of	
  our	
  Comfort	
  Inn,	
  Harrisburg,	
  PA.	
  The	
  Company	
  sold	
  the	
  hotel	
  

for	
  $3,700	
  and	
  recorded	
  a	
  gain	
  on	
  sale	
  of	
  $442.	
  Additionally,	
  on	
  September	
  17,	
  2013,	
  we	
  closed	
  on	
  the	
  sale	
  of	
  
Holiday	
  Inn	
  Express	
  Camp	
  Springs,	
  MD	
  property.	
  The	
  Company	
  sold	
  the	
  hotel	
  for	
  $8,500	
  and	
  recorded	
  a	
  gain	
  on	
  the	
  
sale	
  of	
  $120	
  and	
  an	
  impairment	
  charge	
  of	
  $3,723	
  during	
  the	
  second	
  quarter	
  of	
  2013	
  as	
  the	
  anticipated	
  net	
  
proceeds	
  did	
  not	
  exceed	
  the	
  carrying	
  value.	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2012,	
  the	
  Company	
  closed	
  on	
  the	
  sale	
  of	
  18	
  non-‐core	
  hotel	
  
properties,	
  transferred	
  the	
  title	
  of	
  the	
  Comfort	
  Inn	
  North	
  Dartmouth,	
  MA	
  to	
  the	
  lender	
  and	
  closed	
  on	
  the	
  sale	
  of	
  
the	
  land	
  parcel	
  and	
  improvements	
  located	
  at	
  585	
  Eighth	
  Avenue,	
  New	
  York,	
  NY.	
  As	
  a	
  result	
  of	
  these	
  transactions,	
  
we	
  recognized	
  a	
  gain	
  of	
  approximately	
  $11,231	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  

The	
  operating	
  results	
  for	
  all	
  37	
  of	
  the	
  above	
  described	
  hotel	
  properties	
  and	
  one	
  land	
  parcel	
  have	
  been	
  
reclassified	
  to	
  discontinued	
  operations	
  in	
  the	
  statement	
  of	
  operations	
  for	
  the	
  years	
  end	
  December	
  31,	
  2013	
  and	
  
2012,	
  respectively.	
  

23 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

We	
  recorded	
  income	
  from	
  discontinued	
  operations	
  of	
  approximately	
  $7,388	
  during	
  the	
  twelve	
  months	
  

ended	
  December	
  31,	
  2013,	
  compared	
  to	
  income	
  of	
  approximately	
  $3,489	
  during	
  the	
  twelve	
  months	
  ended	
  
December	
  31,	
  2012.	
  See	
  “Note	
  11	
  –	
  Discontinued	
  Operations”	
  for	
  more	
  information.	
  

Net	
  Income	
  Applicable	
  to	
  Common	
  Shareholders	
  

Net	
  income	
  applicable	
  to	
  common	
  shareholders	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  was	
  $32,752	
  

compared	
  to	
  net	
  income	
  applicable	
  to	
  common	
  shareholders	
  of	
  $8,376	
  for	
  the	
  same	
  period	
  in	
  2012.	
  As	
  previously	
  
discussed,	
  net	
  income	
  applicable	
  to	
  common	
  shareholders	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  was	
  positively	
  
impacted	
  by	
  a	
  net	
  gain	
  of	
  approximately	
  $12,096	
  on	
  the	
  purchase	
  of	
  the	
  Hyatt	
  Union	
  Square,	
  New	
  York,	
  NY,	
  as	
  the	
  
fair	
  value	
  of	
  the	
  assets	
  acquired	
  less	
  any	
  liabilities	
  assumed	
  exceeded	
  the	
  consideration	
  transferred.	
  Additionally,	
  
the	
  $31,559	
  gain	
  on	
  the	
  sale	
  of	
  12	
  of	
  the	
  16	
  non-‐core	
  hotels	
  that	
  closed	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  
positively	
  impacted	
  net	
  income	
  applicable	
  to	
  common	
  shareholders.	
   	
  

Comprehensive	
  Income	
  Applicable	
  to	
  Common	
  Shareholders	
  

Comprehensive	
  income	
  applicable	
  to	
  common	
  shareholders	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  was	
  

$34,162	
  compared	
  to	
  $7,741	
  for	
  the	
  same	
  period	
  in	
  2012.	
  This	
  amount	
  was	
  primarily	
  attributable	
  to	
  net	
  
income/loss	
  as	
  more	
  fully	
  described	
  above.	
  Further	
  change	
  in	
  other	
  comprehensive	
  income	
  was	
  primarily	
  the	
  result	
  
of	
  the	
  positive	
  shift	
  in	
  the	
  position	
  of	
  the	
  fair	
  value	
  of	
  our	
  derivative	
  instruments.	
  For	
  the	
  year	
  ended	
  December	
  31,	
  
2013,	
  we	
  recorded	
  other	
  comprehensive	
  income	
  of	
  $1,410	
  when	
  compared	
  to	
  $635	
  of	
  other	
  comprehensive	
  loss	
  
for	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  During	
  the	
  year,	
  a	
  projected	
  rise	
  in	
  the	
  interest	
  rate	
  yield	
  curve	
  had	
  
favorably	
  shifted	
  many	
  of	
  our	
  interest	
  rate	
  swaps	
  from	
  a	
  liability	
  to	
  an	
  asset	
  position.	
  

LIQUIDITY,	
  CAPITAL	
  RESOURCES,	
  AND	
  EQUITY	
  OFFERINGS	
  

(dollars	
  in	
  thousands,	
  except	
  per	
  share	
  data)	
  

Potential	
  Sources	
  of	
  Capital	
  

Our	
  organizational	
  documents	
  do	
  not	
  limit	
  the	
  amount	
  of	
  indebtedness	
  that	
  we	
  may	
  incur.	
  Our	
  ability	
  to	
  

incur	
  additional	
  debt	
  is	
  dependent	
  upon	
  a	
  number	
  of	
  factors,	
  including	
  the	
  current	
  state	
  of	
  the	
  overall	
  credit	
  
markets,	
  our	
  degree	
  of	
  leverage	
  and	
  borrowing	
  restrictions	
  imposed	
  by	
  existing	
  lenders.	
  Our	
  ability	
  to	
  raise	
  funds	
  
through	
  the	
  issuance	
  of	
  debt	
  and	
  equity	
  securities	
  is	
  dependent	
  upon,	
  among	
  other	
  things,	
  capital	
  market	
  
volatility,	
  risk	
  tolerance	
  of	
  investors,	
  general	
  market	
  conditions	
  for	
  REITs	
  and	
  market	
  perceptions	
  related	
  to	
  the	
  
Company’s	
  ability	
  to	
  generate	
  cash	
  flow	
  and	
  positive	
  returns	
  on	
  its	
  investments.	
  

In	
  addition,	
  our	
  mortgage	
  indebtedness	
  contains	
  various	
  financial	
  and	
  non-‐financial	
  covenants	
  
customarily	
  found	
  in	
  secured,	
  nonrecourse	
  financing	
  arrangements.	
  If	
  the	
  specified	
  criteria	
  are	
  not	
  satisfied,	
  the	
  
lender	
  may	
  be	
  able	
  to	
  escrow	
  cash	
  flow	
  generated	
  by	
  the	
  property	
  securing	
  the	
  applicable	
  mortgage	
  loan.	
  We	
  
have	
  determined	
  that	
  certain	
  debt	
  service	
  coverage	
  ratio	
  covenants	
  contained	
  in	
  the	
  loan	
  agreements	
  securing	
  a	
  
number	
  of	
  our	
  hotel	
  properties	
  were	
  not	
  met	
  as	
  of	
  December	
  31,	
  2014.	
  Pursuant	
  to	
  the	
  loan	
  agreements,	
  certain	
  
lenders	
  have	
  elected	
  to	
  escrow	
  the	
  operating	
  cash	
  flow	
  for	
  these	
  properties.	
  However,	
  these	
  covenants	
  do	
  not	
  
constitute	
  an	
  event	
  of	
  default	
  for	
  these	
  loans.	
  Future	
  deterioration	
  in	
  market	
  conditions	
  could	
  cause	
  restrictions	
  in	
  
our	
  access	
  to	
  the	
  cash	
  flow	
  of	
  additional	
  properties.	
  

On	
  February	
  28,	
  2014,	
  we	
  entered	
  into	
  a	
  senior	
  unsecured	
  credit	
  agreement	
  with	
  Citigroup	
  Global	
  

Markets	
  Inc.	
  and	
  various	
  other	
  lenders.	
  The	
  credit	
  agreement	
  provides	
  for	
  a	
  $500,000	
  senior	
  unsecured	
  credit	
  
facility	
  consisting	
  of	
  a	
  $250,000	
  senior	
  unsecured	
  revolving	
  line	
  of	
  credit	
  and	
  a	
  $250,000	
  senior	
  unsecured	
  term	
  
loan.	
  This	
  new	
  facility	
  amended	
  and	
  restated	
  the	
  existing	
  $400,000	
  senior	
  secured	
  credit	
  facility.	
  The	
  $500,000	
  
unsecured	
  credit	
  facility	
  expires	
  on	
  February	
  28,	
  2018	
  and,	
  provided	
  no	
  event	
  of	
  default	
  has	
  occurred,	
  we	
  may	
  
request	
  that	
  the	
  lenders	
  renew	
  the	
  credit	
  facility	
  for	
  an	
  additional	
  one-‐year	
  period.	
  The	
  credit	
  facility	
  is	
  also	
  
expandable	
  to	
  $850,000	
  at	
  our	
  request,	
  subject	
  to	
  the	
  satisfaction	
  of	
  certain	
  conditions.	
  

24 

	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

As	
  of	
  December	
  31,	
  2014,	
  the	
  outstanding	
  unsecured	
  term	
  loan	
  balance	
  under	
  the	
  $500,000	
  senior	
  

unsecured	
  credit	
  facility	
  was	
  $250,000	
  and	
  therefore	
  fully	
  drawn,	
  and	
  we	
  had	
  no	
  outstanding	
  borrowings	
  under	
  
the	
  $250,000	
  revolving	
  line	
  of	
  credit.	
  As	
  of	
  December	
  31,	
  2014,	
  our	
  remaining	
  borrowing	
  capacity	
  under	
  the	
  
$500,000	
  unsecured	
  credit	
  facility’s	
  revolving	
  line	
  of	
  credit	
  was	
  $245,745,	
  which	
  is	
  based	
  on	
  certain	
  operating	
  
metrics	
  of	
  unencumbered	
  hotel	
  properties	
  designated	
  as	
  borrowing	
  base	
  assets.	
  We	
  intend	
  to	
  repay	
  indebtedness	
  
incurred	
  under	
  the	
  $500,000	
  unsecured	
  credit	
  facility	
  from	
  time	
  to	
  time,	
  for	
  acquisitions	
  or	
  otherwise,	
  out	
  of	
  cash	
  
flow	
  and	
  from	
  the	
  proceeds	
  of	
  issuances	
  of	
  additional	
  common	
  and	
  preferred	
  shares	
  and	
  potentially	
  other	
  
securities.	
  

We	
  will	
  continue	
  to	
  monitor	
  our	
  debt	
  maturities	
  to	
  manage	
  our	
  liquidity	
  needs.	
  However,	
  no	
  assurances	
  
can	
  be	
  given	
  that	
  we	
  will	
  be	
  successful	
  in	
  refinancing	
  all	
  or	
  a	
  portion	
  of	
  our	
  future	
  debt	
  obligations	
  due	
  to	
  factors	
  
beyond	
  our	
  control	
  or	
  that,	
  if	
  refinanced,	
  the	
  terms	
  of	
  such	
  debt	
  will	
  not	
  vary	
  from	
  the	
  existing	
  terms.	
  As	
  of	
  
December	
  31,	
  2014,	
  we	
  have	
  $69,063	
  of	
  indebtedness	
  maturing	
  on	
  or	
  before	
  December	
  31,	
  2015.	
  We	
  currently	
  
expect	
  that	
  cash	
  requirements	
  for	
  all	
  debt	
  that	
  is	
  not	
  refinanced	
  by	
  our	
  existing	
  lenders	
  for	
  which	
  the	
  maturity	
  
date	
  is	
  not	
  extended	
  will	
  be	
  met	
  through	
  a	
  combination	
  of	
  cash	
  on	
  hand,	
  refinancing	
  the	
  existing	
  debt	
  with	
  new	
  
lenders,	
  draws	
  on	
  the	
  $250,000	
  revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  $500,000	
  credit	
  facility	
  and	
  the	
  issuance	
  of	
  
our	
  securities.	
  

On	
  February	
  25,	
  2013,	
  we	
  completed	
  a	
  public	
  offering	
  of	
  3,000,000	
  6.875%	
  Series	
  C	
  preferred	
  shares.	
  

These	
  shares	
  have	
  a	
  par	
  value	
  of	
  $0.01	
  per	
  share	
  with	
  a	
  $25.00	
  liquidation	
  preference	
  per	
  share.	
  Net	
  proceeds	
  of	
  
the	
  offering,	
  after	
  deducting	
  underwriting	
  discounts	
  and	
  offering	
  expenses,	
  were	
  approximately	
  $72,370.	
  We	
  
utilized	
  the	
  net	
  proceeds	
  of	
  the	
  offering	
  to	
  redeem	
  all	
  outstanding	
  8.00%	
  Series	
  A	
  preferred	
  shares	
  on	
  March	
  28,	
  
2013,	
  and	
  for	
  general	
  corporate	
  purposes.	
  The	
  Series	
  A	
  preferred	
  shares	
  were	
  redeemed	
  at	
  a	
  per	
  share	
  
redemption	
  price	
  of	
  $25.00	
  together	
  with	
  accrued	
  and	
  unpaid	
  dividends	
  to	
  the	
  redemption	
  date	
  for	
  an	
  aggregate	
  
per	
  share	
  redemption	
  price	
  of	
  $25.4056.	
  Dividends	
  ceased	
  accruing	
  on	
  the	
  Series	
  A	
  preferred	
  shares	
  on	
  March	
  28,	
  
2013.	
  

Common	
  Share	
  Repurchase	
  Plan	
  

In	
  December	
  2012,	
  our	
  Board	
  of	
  Trustees	
  authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  
aggregate	
  of	
  $75,000	
  of	
  our	
  outstanding	
  common	
  shares	
  through	
  December	
  31,	
  2013.	
  We	
  did	
  not	
  repurchase	
  any	
  
common	
  shares	
  prior	
  to	
  the	
  expiration	
  of	
  the	
  share	
  repurchase	
  program.	
  In	
  January	
  2014,	
  our	
  Board	
  of	
  Trustees	
  
again	
  authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  aggregate	
  of	
  $75,000	
  of	
  our	
  outstanding	
  common	
  
shares.	
  In	
  February	
  2015,	
  our	
  Board	
  of	
  Trustees	
  again	
  authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  
aggregate	
  of	
  $100,000	
  of	
  our	
  outstanding	
  common	
  shares.	
  The	
  current	
  share	
  repurchase	
  program	
  will	
  expire	
  on	
  
December	
  31,	
  2015.	
  For	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  the	
  Company	
  repurchased	
  2,626,854	
  common	
  shares	
  
for	
  an	
  aggregate	
  purchase	
  price	
  of	
  $15,418.	
  As	
  of	
  February	
  20,	
  2015,	
  we	
  have	
  not	
  repurchased	
  any	
  common	
  shares	
  
pursuant	
  to	
  the	
  newly	
  reauthorized	
  share	
  repurchase	
  program.	
  Upon	
  repurchase	
  by	
  the	
  Company,	
  these	
  common	
  
shares	
  ceased	
  to	
  be	
  outstanding	
  and	
  became	
  authorized	
  but	
  unissued	
  commons	
  shares.	
  

Development	
  Loans	
  Receivable	
  

During	
  April	
  2013,	
  we	
  acquired	
  the	
  Hyatt	
  Union	
  Square,	
  and	
  as	
  part	
  of	
  the	
  consideration	
  we	
  agreed	
  to	
  

cancel	
  the	
  $13,303	
  development	
  loan	
  receivable	
  in	
  its	
  entirety.	
  Furthermore,	
  the	
  development	
  loan	
  related	
  to	
  the	
  
Hyatt	
  48Lex	
  was	
  paid	
  in	
  full	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  As	
  of	
  December	
  31,	
  2014,	
  we	
  had	
  no	
  
outstanding	
  development	
  loans	
  receivable.	
  

25 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

Acquisitions	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  we	
  acquired	
  the	
  following	
  wholly-‐owned	
  hotel	
  properties:	
  

Hotel	
   	
  

Acquisition	
  
Date	
  

Land	
   	
  

Buildings	
  and	
  
Improvements	
   	
  	
   	
  

Furniture	
  
Fixtures	
  
and	
  
Equipment	
   	
  	
   	
  

Ground	
  
Lease	
  
Intangible	
   	
   	
  

Franchise	
  
Fees	
  and	
  
Loan	
  
Costs	
  

Total	
  
Purchase	
  

Price	
   	
   	
   	
  

Assumption	
  
of	
  Debt	
  

Hotel	
  Milo,	
  
Santa	
  Barbara,	
  CA	
  

Parrot	
  Key	
  Resort,	
   	
  
Key	
  West,	
  FL	
  

Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
   	
  
New	
  York,	
  NY	
  

	
   2/28/2014	
  	
   $	
  

	
   -‐	
   	
  $	
  

	
   55,080	
  	
   	
  $	
  

	
   805	
  	
   	
  $	
   	
   (14,230)	
   	
  $	
  

	
   273	
  	
   	
  $	
  

	
   41,928	
  	
  	
   $	
  

	
   24,924	
  	
  

	
   5/7/2014	
   	
  

	
   	
   57,889	
  	
   	
   	
  

	
   33,959	
  	
   	
   	
  

	
   8,152	
  	
   	
   	
  

	
   -‐	
   	
   	
  

	
   -‐	
   	
   	
   	
   100,000	
  	
  	
   	
  

  - 

	
   5/27/2014	
  	
  

	
   	
   45,480	
  	
   	
   	
  

	
   60,762	
  	
   	
   	
  

	
   4,920	
  	
   	
   	
  

	
   -‐	
   	
   	
  

	
   1,123	
  	
   	
   	
   	
   112,285	
  	
  	
   	
  

	
   -‐	
  

TOTAL	
  

	
   $	
  	
   103,369	
  	
   	
  $	
  

	
   149,801	
  	
   	
  $	
  

	
   13,877	
  	
   	
  $	
   	
   (14,230)	
   	
  $	
  

	
   1,396	
  	
   	
  $	
   	
   254,213	
  	
  	
   $	
  

	
   24,924	
  	
  

We	
  intend	
  to	
  invest	
  in	
  additional	
  hotels	
  only	
  as	
  suitable	
  opportunities	
  arise	
  and	
  adequate	
  sources	
  of	
  
financing	
  are	
  available.	
  We	
  expect	
  that	
  future	
  investments	
  in	
  hotels	
  will	
  depend	
  on	
  and	
  will	
  be	
  financed	
  by,	
  in	
  
whole	
  or	
  in	
  part,	
  our	
  existing	
  cash,	
  the	
  proceeds	
  from	
  additional	
  issuances	
  of	
  common	
  or	
  preferred	
  shares,	
  
proceeds	
  from	
  the	
  sale	
  of	
  assets,	
  issuances	
  of	
  Common	
  Units,	
  issuances	
  of	
  preferred	
  units	
  or	
  other	
  securities	
  or	
  
borrowings.	
  

Operating	
  Liquidity	
  and	
  Capital	
  Expenditures	
  

We	
  expect	
  to	
  meet	
  our	
  short-‐term	
  liquidity	
  requirements	
  generally	
  through	
  net	
  cash	
  provided	
  by	
  
operations,	
  existing	
  cash	
  balances	
  and,	
  if	
  necessary,	
  short-‐term	
  borrowings	
  under	
  the	
  $250,000	
  unsecured	
  
revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  $500,000	
  unsecured	
  credit	
  facility.	
  We	
  believe	
  that	
  the	
  net	
  cash	
  provided	
  by	
  
operations	
  in	
  the	
  coming	
  year	
  and	
  borrowings	
  drawn	
  on	
  the	
  $250,000	
  revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  
$500,000	
  unsecured	
  credit	
  facility	
  will	
  be	
  adequate	
  to	
  fund	
  the	
  Company’s	
  operating	
  requirements,	
  monthly	
  
recurring	
  debt	
  service	
  and	
  the	
  payment	
  of	
  dividends	
  in	
  accordance	
  with	
  REIT	
  requirements	
  of	
  the	
  Code,	
  as	
  
amended.	
  

To	
  qualify	
  as	
  a	
  REIT,	
  we	
  must	
  distribute	
  annually	
  at	
  least	
  90%	
  of	
  our	
  taxable	
  income.	
  This	
  distribution	
  
requirement	
  limits	
  our	
  ability	
  to	
  retain	
  earnings	
  and	
  requires	
  us	
  to	
  raise	
  additional	
  capital	
  in	
  order	
  to	
  grow	
  our	
  
business	
  and	
  acquire	
  additional	
  hotel	
  properties.	
  However,	
  there	
  is	
  no	
  assurance	
  that	
  we	
  will	
  be	
  able	
  to	
  borrow	
  
funds	
  or	
  raise	
  additional	
  equity	
  capital	
  on	
  terms	
  acceptable	
  to	
  us,	
  if	
  at	
  all.	
  In	
  addition,	
  we	
  cannot	
  guarantee	
  that	
  we	
  
will	
  continue	
  to	
  make	
  distributions	
  to	
  our	
  shareholders	
  at	
  the	
  current	
  rate	
  or	
  at	
  all.	
  Due	
  to	
  the	
  seasonality	
  of	
  our	
  
business,	
  cash	
  provided	
  by	
  operating	
  activities	
  fluctuates	
  significantly	
  from	
  quarter	
  to	
  quarter.	
  However,	
  we	
  
believe	
  that,	
  based	
  on	
  our	
  current	
  estimates,	
  which	
  include	
  the	
  addition	
  of	
  cash	
  provided	
  by	
  hotels	
  acquired	
  during	
  
2014,	
  our	
  cash	
  provided	
  by	
  operating	
  activities	
  will	
  be	
  sufficient	
  over	
  the	
  next	
  12	
  months	
  to	
  fund	
  the	
  payment	
  of	
  
our	
  dividend	
  at	
  its	
  current	
  level.	
  However,	
  our	
  Board	
  of	
  Trustees	
  continues	
  to	
  evaluate	
  the	
  dividend	
  policy	
  in	
  the	
  
context	
  of	
  our	
  overall	
  liquidity	
  and	
  market	
  conditions	
  and	
  may	
  elect	
  to	
  reduce	
  or	
  suspend	
  these	
  distributions.	
   	
   Net	
  
cash	
  provided	
  by	
  operating	
  activities	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  $112,894	
  and	
  cash	
  used	
  for	
  the	
  
payment	
  of	
  distributions	
  and	
  dividends	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  $66,366.	
  

We	
  also	
  project	
  that	
  our	
  operating	
  cash	
  flow	
  and	
  available	
  borrowings	
  under	
  the	
  $250,000	
  revolving	
  line	
  
of	
  credit	
  portion	
  of	
  our	
  $500,000	
  unsecured	
  credit	
  facility	
  will	
  be	
  sufficient	
  to	
  satisfy	
  our	
  liquidity	
  and	
  other	
  capital	
  
needs	
  over	
  the	
  next	
  twelve	
  to	
  eighteen	
  months.	
  

Our	
  long-‐term	
  liquidity	
  requirements	
  consist	
  primarily	
  of	
  the	
  costs	
  of	
  acquiring	
  additional	
  hotel	
  properties,	
  

renovation	
  and	
  other	
  non-‐recurring	
  capital	
  expenditures	
  that	
  need	
  to	
  be	
  made	
  periodically	
  with	
  respect	
  to	
  hotel	
  
properties	
  and	
  scheduled	
  debt	
  repayments.	
  We	
  will	
  seek	
  to	
  satisfy	
  these	
  long-‐term	
  liquidity	
  requirements	
  through	
  

26 

	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

various	
  sources	
  of	
  capital,	
  including	
  borrowings	
  under	
  the	
  $250,000	
  revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  $500,000	
  
unsecured	
  credit	
  facility	
  and	
  through	
  secured,	
  non-‐recourse	
  mortgage	
  financings	
  with	
  respect	
  to	
  our	
  
unencumbered	
  hotel	
  properties.	
  In	
  addition,	
  we	
  may	
  seek	
  to	
  raise	
  capital	
  through	
  public	
  or	
  private	
  offerings	
  of	
  our	
  
securities.	
  Certain	
  factors	
  may	
  have	
  a	
  material	
  adverse	
  effect	
  on	
  our	
  ability	
  to	
  access	
  these	
  capital	
  sources,	
  
including	
  our	
  degree	
  of	
  leverage,	
  the	
  value	
  of	
  our	
  unencumbered	
  hotel	
  properties	
  and	
  borrowing	
  restrictions	
  
imposed	
  by	
  lenders	
  or	
  franchisors.	
  We	
  will	
  continue	
  to	
  analyze	
  which	
  source	
  of	
  capital	
  is	
  most	
  advantageous	
  to	
  us	
  
at	
  any	
  particular	
  point	
  in	
  time,	
  but	
  financing	
  may	
  not	
  be	
  consistently	
  available	
  to	
  us	
  on	
  terms	
  that	
  are	
  attractive,	
  or	
  
at	
  all.	
   	
  

Spending	
  on	
  capital	
  improvements	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  decreased	
  when	
  compared	
  
to	
  spending	
  on	
  capital	
  improvements	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  During	
  the	
  year	
  ended	
  December	
  
31,	
  2014,	
  we	
  spent	
  $38,342	
  on	
  capital	
  expenditures	
  to	
  renovate,	
  improve	
  or	
  replace	
  assets	
  at	
  our	
  hotels.	
  This	
  
compares	
  to	
  $42,854	
  during	
  the	
  same	
  period	
  in	
  2013.	
  These	
  capital	
  expenditures	
  were	
  undertaken	
  to	
  comply	
  with	
  
brand	
  mandated	
  improvements	
  and	
  to	
  initiate	
  projects	
  that	
  we	
  believe	
  will	
  generate	
  a	
  return	
  on	
  investment	
  to	
  
take	
  advantage	
  of	
  the	
  continuing	
  recovery	
  in	
  the	
  lodging	
  sector.	
   	
  

In	
  addition	
  to	
  capital	
  reserves	
  required	
  under	
  certain	
  loan	
  agreements	
  and	
  capital	
  expenditures	
  to	
  
renovate,	
  improve	
  or	
  replace	
  assets	
  at	
  our	
  hotels,	
  we	
  have	
  opportunistically	
  engaged	
  in	
  hotel	
  development	
  
projects.	
  During	
  the	
  twelve	
  months	
  ended	
  December	
  31,	
  2014,	
  we	
  spent	
  $16,290	
  less	
  on	
  hotel	
  development	
  
projects	
  than	
  during	
  the	
  same	
  period	
  of	
  2013	
  as	
  both	
  the	
  new	
  tower	
  construction	
  at	
  Courtyard	
  Miami	
  Beach	
  and	
  
re-‐development	
  project	
  at	
  Hampton	
  Inn	
  Pearl	
  Street	
  hotels	
  neared	
  completion.	
  Projects	
  such	
  as	
  these	
  require	
  
significant	
  capital,	
  which	
  we	
  expect	
  to	
  fund	
  with	
  various	
  sources	
  of	
  capital,	
  including	
  available	
  borrowings	
  under	
  
the	
  $250,000	
  revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  credit	
  facility	
  and	
  through	
  secured,	
  non-‐recourse	
  mortgage	
  
financings.	
  In	
  addition,	
  we	
  may	
  seek	
  to	
  raise	
  capital	
  through	
  public	
  or	
  private	
  offerings	
  of	
  our	
  securities	
  to	
  fund	
  
these	
  capital	
  improvements.	
   	
  

We	
  may	
  spend	
  additional	
  amounts,	
  if	
  necessary,	
  to	
  comply	
  with	
  the	
  reasonable	
  requirements	
  of	
  any	
  

franchise	
  license	
  under	
  which	
  any	
  of	
  our	
  hotels	
  operate	
  and	
  otherwise	
  to	
  the	
  extent	
  we	
  deem	
  such	
  expenditures	
  
to	
  be	
  in	
  our	
  best	
  interests.	
  We	
  are	
  also	
  obligated	
  to	
  fund	
  the	
  cost	
  of	
  certain	
  capital	
  improvements	
  to	
  our	
  hotels.	
  
We	
  expect	
  to	
  use	
  operating	
  cash	
  flow,	
  borrowings	
  under	
  the	
  $250,000	
  revolving	
  line	
  of	
  credit	
  portion	
  of	
  our	
  credit	
  
facility,	
  and	
  proceeds	
  from	
  issuances	
  of	
  our	
  securities	
  to	
  pay	
  for	
  the	
  cost	
  of	
  capital	
  improvements	
  and	
  any	
  
furniture,	
  fixture	
  and	
  equipment	
  requirements	
  in	
  excess	
  of	
  the	
  set	
  aside	
  referenced	
  above.	
  

CASH	
  FLOW	
  ANALYSIS	
  (dollars	
  in	
  thousands,	
  except	
  per	
  share	
  data)	
  

Comparison	
  of	
  the	
  Years	
  Ended	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  

Net	
  cash	
  provided	
  by	
  operating	
  activities	
  increased	
  $22,633	
  from	
  $90,261	
  for	
  the	
  year	
  ended	
  December	
  
31,	
  2013	
  to	
  $112,894	
  for	
  the	
  comparable	
  period	
  in	
  2014.	
  Net	
  income,	
  adjusted	
  for	
  non-‐cash	
  items	
  reflected	
  in	
  the	
  
statement	
  of	
  cash	
  flows	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014	
  and	
  2013,	
  increased	
  $17,698	
  for	
  the	
  year	
  ended	
  
December	
  31,	
  2014	
  when	
  compared	
  to	
  2013.	
  This	
  is	
  primarily	
  due	
  to	
  cash	
  provided	
  by	
  properties	
  acquired	
  over	
  the	
  
past	
  twelve	
  months	
  and	
  improving	
  operating	
  results	
  within	
  our	
  existing	
  portfolio.	
  The	
  offsetting	
  decrease	
  in	
  cash	
  
provided	
  by	
  operating	
  activities	
  was	
  attributable	
  to	
  an	
  increase	
  in	
  working	
  capital	
  assets.	
   	
  

Net	
  cash	
  used	
  in	
  investing	
  activities	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  increased	
  $55,030	
  from	
  
$125,474	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  compared	
  to	
  $180,504	
  for	
  2014.	
  While	
  spending	
  on	
  the	
  purchase	
  
of	
  hotel	
  properties	
  and	
  deposits	
  on	
  hotel	
  acquisitions	
  was	
  $43,742	
  higher	
  during	
  the	
  year	
  ended	
  December	
  31,	
  
2013,	
  compared	
  to	
  same	
  period	
  in	
  2014,	
  proceeds	
  from	
  the	
  disposition	
  of	
  hotel	
  properties	
  was	
  $105,959	
  less	
  
during	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  when	
  compared	
  to	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
   	
   Offsetting	
  this	
  
was	
  spending	
  on	
  hotel	
  development	
  projects	
  which	
  was	
  $16,290	
  less	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  
when	
  compared	
  to	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  and	
  a	
  repayment	
  of	
  note	
  receivable	
  of	
  $15,122	
  which	
  
occurred	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  During	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  we	
  received	
  

27 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
annual report 2014 

$30,056	
  in	
  proceeds	
  from	
  the	
  disposition	
  of	
  Hotel	
  373	
  in	
  the	
  second	
  quarter	
  and	
  the	
  remaining	
  4	
  non-‐core	
  
properties	
  during	
  the	
  first	
  quarter.	
  	
   	
  

Net	
  cash	
  provided	
  by	
  financing	
  activities	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  was	
  $53,072	
  compared	
  to	
  

net	
  cash	
  provided	
  by	
  financing	
  activities	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  of	
  $2,367.	
  Net	
  proceeds	
  received	
  
during	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  under	
  our	
  unsecured	
  credit	
  facility	
  were	
  $50,000	
  higher	
  than	
  during	
  the	
  
same	
  period	
  in	
  2013.	
  Net	
  proceeds	
  from	
  mortgages	
  and	
  notes	
  payable	
  were	
  $29,050	
  higher	
  during	
  the	
  year	
  ended	
  
December	
  31,	
  2014,	
  when	
  compared	
  to	
  the	
  same	
  period	
  in	
  2013.	
  During	
  the	
  first	
  quarter	
  of	
  2013,	
  we	
  completed	
  an	
  
offering	
  of	
  Series	
  C	
  Preferred	
  Shares	
  with	
  net	
  proceeds	
  of	
  $72,370,	
  after	
  deducting	
  underwriting	
  discounts	
  and	
  
offering	
  expenses,	
  which	
  was	
  primarily	
  used	
  to	
  redeem	
  all	
  of	
  the	
  issued	
  and	
  outstanding	
  Series	
  A	
  Preferred	
  Shares	
  
with	
  a	
  redemption	
  value	
  of	
  $60,000.	
  	
  During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  we	
  used	
  $15,418	
  for	
  the	
  
repurchase	
  of	
  common	
  shares.	
  Dividends	
  and	
  distributions	
  payable	
  decreased	
  $391	
  during	
  the	
  year	
  ended	
  
December	
  31,	
  2014,	
  compared	
  to	
  2013,	
  due	
  to	
  a	
  decrease	
  in	
  the	
  number	
  of	
  outstanding	
  common	
  shares.	
   	
  

Comparison	
  of	
  the	
  Years	
  Ended	
  December	
  31,	
  2013	
  and	
  December	
  31,	
  2012	
  

Net	
  cash	
  provided	
  by	
  operating	
  activities	
  increased	
  $18,505,	
  from	
  $71,756	
  for	
  the	
  year	
  ended	
  December	
  
31,	
  2012	
  to	
  $90,261	
  for	
  2013.	
  Net	
  income,	
  adjusted	
  for	
  non-‐cash	
  items	
  such	
  as	
  gain	
  on	
  acquisition	
  of	
  hotel	
  assets,	
  
gain	
  on	
  disposition	
  of	
  hotel	
  properties,	
  impairment	
  of	
  assets,	
  benefit	
  for	
  income	
  taxes,	
  depreciation	
  and	
  
amortization,	
  non-‐cash	
  debt	
  extinguishment,	
  development	
  loan	
  interest	
  income	
  added	
  to	
  principal,	
  interest	
  in	
  
income/loss	
  from	
  and	
  distributions	
  from	
  unconsolidated	
  joint	
  ventures,	
  loss	
  recognized	
  on	
  change	
  in	
  fair	
  value	
  of	
  
derivative	
  instruments	
  and	
  stock	
  based	
  compensation	
  increased	
  $4,720	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013	
  
when	
  compared	
  to	
  2012.	
  This	
  is	
  primarily	
  due	
  to	
  cash	
  provided	
  by	
  properties	
  acquired	
  over	
  the	
  past	
  twelve	
  months	
  
and	
  improving	
  operating	
  results	
  within	
  our	
  existing	
  portfolio.	
  In	
  addition	
  to	
  these	
  increases	
  in	
  cash	
  provided	
  by	
  
these	
  operating	
  activities	
  was	
  an	
  increase	
  in	
  net	
  cash	
  used	
  in	
  funding	
  working	
  capital	
  assets,	
  such	
  as	
  payments	
  into	
  
escrows,	
  and	
  repaying	
  working	
  capital	
  liabilities,	
  such	
  as	
  accounts	
  payable	
  and	
  accrued	
  expenses.	
  

Net	
  cash	
  used	
  in	
  investing	
  activities	
  increased	
  $69,657,	
  from	
  $55,817	
  for	
  year	
  ended	
  December	
  31,	
  2012	
  

to	
  $125,474	
  for	
  2013.	
  Spending	
  on	
  the	
  purchase	
  of	
  hotel	
  properties,	
  deposits	
  on	
  hotel	
  acquisitions	
  and	
  
development	
  projects	
  was	
  $142,474	
  higher	
  during	
  2013	
  compared	
  to	
  2012.	
  Offsetting	
  this	
  increase	
  in	
  spending	
  on	
  
the	
  purchase	
  of	
  new	
  hotels	
  was	
  in	
  increase	
  in	
  proceeds	
  from	
  the	
  disposition	
  of	
  hotel	
  properties,	
  which	
  during	
  the	
  
year	
  ended	
  December	
  31,	
  2013	
  was	
  $72,293	
  higher	
  than	
  during	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  

Net	
  cash	
  provided	
  by	
  financing	
  activities	
  for	
  year	
  ended	
  December	
  31,	
  2013	
  was	
  $2,367	
  compared	
  to	
  
$28,552	
  during	
  the	
  same	
  period	
  in	
  2012.	
  During	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  we	
  received	
  proceeds	
  of	
  
$72,370	
  from	
  the	
  issuance	
  of	
  our	
  series	
  C	
  preferred	
  shares	
  and	
  used	
  $60,000	
  of	
  these	
  proceeds	
  to	
  redeem	
  our	
  
series	
  A	
  preferred	
  shares,	
  resulting	
  in	
  net	
  proceeds	
  of	
  $12,370.	
   	
   During	
  the	
  same	
  period	
  in	
  2012	
  we	
  received	
  net	
  
proceeds	
  of	
  $128,558	
  from	
  the	
  issuance	
  of	
  common	
  shares.	
  Dividends	
  and	
  distributions	
  payable	
  increased	
  $6,630	
  
during	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  compared	
  to	
  2012,	
  due	
  to	
  an	
  increase	
  in	
  the	
  number	
  of	
  outstanding	
  
common	
  shares	
  as	
  a	
  result	
  of	
  a	
  common	
  stock	
  offering	
  completed	
  in	
  May	
  2012,	
  and	
  the	
  additional	
  preferred	
  share	
  
dividends	
  we	
  paid	
  due	
  to	
  the	
  timing	
  of	
  the	
  preferred	
  stock	
  offering	
  and	
  subsequent	
  redemption	
  which	
  occurred	
  in	
  
March	
  2013.	
   	
   For	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  borrowings	
  under	
  our	
  unsecured	
  term	
  loan	
  and	
  mortgages	
  
and	
  notes	
  payable,	
  net	
  of	
  repayments	
  provided	
  cash	
  of	
  $60,602,	
  compared	
  to	
  net	
  repayments	
  of	
  $39,783	
  for	
  the	
  
same	
  period	
  in	
  2012.	
  

OFF	
  BALANCE	
  SHEET	
  ARRANGEMENTS	
  

The	
  Company	
  does	
  not	
  have	
  off	
  balance	
  sheet	
  arrangements	
  that	
  have	
  or	
  are	
  reasonably	
  likely	
  to	
  have	
  a	
  

current	
  or	
  future	
  effect	
  on	
  our	
  financial	
  condition,	
  revenues	
  or	
  expenses,	
  results	
  of	
  operations,	
  liquidity,	
  capital	
  
expenditures	
  or	
  capital	
  resources.	
  

28 

	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

FUNDS	
  FROM	
  OPERATIONS	
  

(in	
  thousands,	
  except	
  share	
  data)	
  

The	
  National	
  Association	
  of	
  Real	
  Estate	
  Investment	
  Trusts	
  (“NAREIT”)	
  developed	
  Funds	
  from	
  Operations	
  

(“FFO”)	
  as	
  a	
  non-‐GAAP	
  financial	
  measure	
  of	
  performance	
  of	
  an	
  equity	
  REIT	
  in	
  order	
  to	
  recognize	
  that	
  
income-‐producing	
  real	
  estate	
  historically	
  has	
  not	
  depreciated	
  on	
  the	
  basis	
  determined	
  under	
  GAAP.	
  We	
  calculate	
  
FFO	
  applicable	
  to	
  common	
  shares	
  and	
  Common	
  Units	
  in	
  accordance	
  with	
  the	
  April	
  2002	
  National	
  Policy	
  Bulletin	
  of	
  
NAREIT,	
  which	
  we	
  refer	
  to	
  as	
  the	
  White	
  Paper.	
  The	
  White	
  Paper	
  defines	
  FFO	
  as	
  net	
  income	
  (loss)	
  (computed	
  in	
  
accordance	
  with	
  GAAP)	
  excluding	
  extraordinary	
  items	
  as	
  defined	
  under	
  GAAP	
  and	
  gains	
  or	
  losses	
  from	
  sales	
  of	
  
previously	
  depreciated	
  assets,	
  gains	
  on	
  hotel	
  acquisitions,	
  plus	
  certain	
  non-‐cash	
  items,	
  such	
  as	
  loss	
  from	
  
impairment	
  of	
  assets	
  and	
  depreciation	
  and	
  amortization,	
  and	
  after	
  adjustments	
  for	
  unconsolidated	
  partnerships	
  
and	
  joint	
  ventures.	
  Our	
  interpretation	
  of	
  the	
  NAREIT	
  definition	
  is	
  that	
  noncontrolling	
  interest	
  in	
  net	
  income	
  (loss)	
  
should	
  be	
  added	
  back	
  to	
  (deducted	
  from)	
  net	
  income	
  (loss)	
  as	
  part	
  of	
  reconciling	
  net	
  income	
  (loss)	
  to	
  FFO.	
  Our	
  FFO	
  
computation	
  may	
  not	
  be	
  comparable	
  to	
  FFO	
  reported	
  by	
  other	
  REITs	
  that	
  do	
  not	
  compute	
  FFO	
  in	
  accordance	
  with	
  
the	
  NAREIT	
  definition,	
  or	
  that	
  interpret	
  the	
  NAREIT	
  definition	
  differently	
  than	
  we	
  do.	
  

The	
  GAAP	
  measure	
  that	
  we	
  believe	
  to	
  be	
  most	
  directly	
  comparable	
  to	
  FFO,	
  net	
  income	
  (loss)	
  applicable	
  to	
  

common	
  shareholders,	
  includes	
  loss	
  from	
  the	
  impairment	
  of	
  certain	
  depreciable	
  assets,	
  our	
  investment	
  in	
  
unconsolidated	
  joint	
  ventures	
  and	
  land,	
  depreciation	
  and	
  amortization	
  expenses,	
  gains	
  or	
  losses	
  on	
  property	
  sales,	
  
gains	
  on	
  hotel	
  acquisitions,	
  noncontrolling	
  interest	
  and	
  preferred	
  dividends.	
  In	
  computing	
  FFO,	
  we	
  eliminate	
  these	
  
items	
  because,	
  in	
  our	
  view,	
  they	
  are	
  not	
  indicative	
  of	
  the	
  results	
  from	
  our	
  property	
  operations.	
  We	
  determined	
  
that	
  the	
  loss	
  from	
  the	
  impairment	
  of	
  certain	
  depreciable	
  assets	
  including	
  investments	
  in	
  unconsolidated	
  joint	
  
ventures	
  and	
  land,	
  was	
  driven	
  by	
  a	
  measurable	
  decrease	
  in	
  the	
  fair	
  value	
  of	
  certain	
  hotel	
  properties	
  and	
  other	
  
assets	
  as	
  determined	
  by	
  our	
  analysis	
  of	
  those	
  assets	
  in	
  accordance	
  with	
  applicable	
  GAAP.	
  As	
  such,	
  these	
  
impairments	
  have	
  been	
  eliminated	
  from	
  net	
  loss	
  to	
  determine	
  FFO.	
  

FFO	
  does	
  not	
  represent	
  cash	
  flows	
  from	
  operating	
  activities	
  in	
  accordance	
  with	
  GAAP	
  and	
  should	
  not	
  be	
  

considered	
  an	
  alternative	
  to	
  net	
  income	
  as	
  an	
  indication	
  of	
  the	
  Company’s	
  performance	
  or	
  to	
  cash	
  flow	
  as	
  a	
  
measure	
  of	
  liquidity	
  or	
  ability	
  to	
  make	
  distributions.	
  We	
  consider	
  FFO	
  to	
  be	
  a	
  meaningful,	
  additional	
  measure	
  of	
  
operating	
  performance	
  because	
  it	
  excludes	
  the	
  effects	
  of	
  the	
  assumption	
  that	
  the	
  value	
  of	
  real	
  estate	
  assets	
  
diminishes	
  predictably	
  over	
  time,	
  and	
  because	
  it	
  is	
  widely	
  used	
  by	
  industry	
  analysts	
  as	
  a	
  performance	
  measure.	
  We	
  
show	
  both	
  FFO	
  from	
  consolidated	
  hotel	
  operations	
  and	
  FFO	
  from	
  unconsolidated	
  joint	
  ventures	
  because	
  we	
  
believe	
  it	
  is	
  meaningful	
  for	
  the	
  investor	
  to	
  understand	
  the	
  relative	
  contributions	
  from	
  our	
  consolidated	
  and	
  
unconsolidated	
  hotels.	
  The	
  display	
  of	
  both	
  FFO	
  from	
  consolidated	
  hotels	
  and	
  FFO	
  from	
  unconsolidated	
  joint	
  
ventures	
  allows	
  for	
  a	
  detailed	
  analysis	
  of	
  the	
  operating	
  performance	
  of	
  our	
  hotel	
  portfolio	
  by	
  management	
  and	
  
investors.	
  We	
  present	
  FFO	
  applicable	
  to	
  common	
  shares	
  and	
  Common	
  Units	
  because	
  our	
  Common	
  Units	
  are	
  
redeemable	
  for	
  common	
  shares.	
  We	
  believe	
  it	
  is	
  meaningful	
  for	
  the	
  investor	
  to	
  understand	
  FFO	
  applicable	
  to	
  all	
  
common	
  shares	
  and	
  Common	
  Units.	
  

29 

	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
annual report 2014 

The	
  following	
  table	
  reconciles	
  FFO	
  for	
  the	
  periods	
  presented	
  to	
  the	
  most	
  directly	
  comparable	
  GAAP	
  

measure,	
  net	
  income,	
  for	
  the	
  same	
  periods	
  (dollars	
  in	
  thousands):	
  

	
   December	
  31,	
  2014	
   	
   	
   December	
  31,	
  2013	
   	
   	
   December	
  31,	
  2012	
  

Year	
  Ended	
  

Net	
  income	
  applicable	
  to	
  common	
  shareholders	
  

	
   $	
  

Income	
  (loss)	
  allocated	
  to	
  noncontrolling	
  interests	
  
(Income)	
  loss	
  from	
  unconsolidated	
  joint	
  ventures	
  
Gain	
  on	
  hotel	
  acquisition	
  
Development	
  Loan	
  Recovery	
  
Gain	
  on	
  disposition	
  of	
  hotel	
  properties	
  
Loss	
  from	
  impairment	
  of	
  depreciable	
  assets	
  

Depreciation	
  and	
  amortization	
   	
  
Depreciation	
  and	
  amortization	
  from	
  discontinued	
  operations	
  

Funds	
  from	
  consolidated	
  hotel	
  operations	
  
applicable	
  to	
  common	
  shareholders	
  and	
  Partnership	
  units	
  

	
   52,899	
  	
  	
   $	
  
	
   1,016	
  	
  	
  
	
   (693)	
  	
  
	
   (12,667)	
  	
  
	
   (22,494)	
  	
  
	
   (7,067)	
  	
  
	
   1,800	
  	
  	
  

	
   69,167	
  	
  	
  
	
   -‐	
  	
  

	
   32,752	
  	
  	
   $	
  
	
   335	
  	
  	
  
	
   1,835	
  	
  	
  
	
   (12,096)	
  	
  
	
   -‐	
  	
  
	
   (32,121)	
  	
  
	
   10,314	
  	
  	
  

	
   55,784	
  	
  	
  
	
   7,050	
  	
  	
  

	
   8,376	
  	
  
	
   (158)	
  
	
   2,124	
  	
  
	
   -‐	
  
	
   -‐	
  
	
   (11,231)	
  
	
   -‐	
  

	
   48,243	
  	
  
	
   9,148	
  	
  

	
   81,961	
  	
  	
  

	
   63,853	
  	
  	
  

	
   56,502	
  	
  

Income	
  (loss)	
  from	
  Unconsolidated	
  Joint	
  Ventures	
  

	
   693	
  	
  	
  

	
   (1,835)	
  	
  

	
   (2,124)	
  

Loss	
  from	
  remeasurement	
  of	
  
investment	
  in	
  unconsolidated	
  joint	
  ventures	
  
Impairment	
  of	
  investment	
  in	
  unconsolidated	
  joint	
  ventures	
  

Depreciation	
  and	
  amortization	
  of	
  purchase	
  price	
  
	
   	
   	
   in	
  excess	
  of	
  historical	
  cost	
  (1)	
  

Interest	
  in	
  depreciation	
  and	
  amortization	
  
	
   	
   	
   of	
  unconsolidated	
  joint	
  ventures	
  (2)	
  

Funds	
  from	
  unconsolidated	
  joint	
  ventures	
  operations	
  
applicable	
  to	
  common	
  shareholders	
  and	
  Partnership	
  units	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   570	
  	
  	
  

	
   5,915	
  	
  	
  

	
   7,178	
  	
  	
  

	
   -‐	
  	
  
	
   1,813	
  	
  	
  

	
   596	
  	
  	
  

	
   6,068	
  	
  	
  

	
   6,642	
  	
  	
  

	
   1,892	
  	
  
	
   -‐	
  

	
   902	
  	
  

	
   5,441	
  	
  

	
   6,111	
  	
  

Funds	
  from	
  Operations	
  
applicable	
  to	
  common	
  shareholders	
  and	
  Partnership	
  units	
  

	
   $	
  

	
   89,139	
  	
  	
   $	
  

	
   70,495	
  	
  	
   $	
  

	
   62,613	
  	
  

Weighted	
  Average	
  Common	
  Shares	
  and	
  Units	
  Outstanding	
  

Basic	
  
Diluted	
   	
  

(1)	
  

(2)	
  

199,109,209	
  	
  
208,139,670	
  	
  

198,390,450	
  	
  
208,886,212	
  	
  

187,415,270	
  
198,110,615	
  

Adjustment	
   made	
   to	
   add	
   depreciation	
   of	
   purchase	
   price	
   in	
   excess	
   of	
   historical	
   cost	
   of	
   the	
   assets	
   in	
   the	
  
unconsolidated	
  joint	
  venture	
  at	
  the	
  time	
  of	
  our	
  investment.	
  

Adjustment	
   made	
   to	
   add	
   our	
   interest	
   in	
   real	
   estate	
   related	
   depreciation	
   and	
   amortization	
   of	
   our	
  
unconsolidated	
  joint	
  ventures.	
  Allocation	
  of	
  depreciation	
  and	
  amortization	
  is	
  consistent	
  with	
  allocation	
  of	
  
income	
  and	
  loss.	
  

Certain	
  amounts	
  related	
  to	
  depreciation	
  and	
  amortization	
  and	
  depreciation	
  and	
  amortization	
  from	
  
discontinued	
  operations	
  in	
  the	
  prior	
  year	
  FFO	
  reconciliation	
  have	
  been	
  recast	
  to	
  conform	
  to	
  the	
  current	
  year	
  
presentation.	
  In	
  addition,	
  based	
  on	
  guidance	
  provided	
  by	
  NAREIT,	
  we	
  have	
  eliminated	
  loss	
  from	
  the	
  impairment	
  of	
  
certain	
  depreciable	
  assets,	
  including	
  investments	
  in	
  unconsolidated	
  joint	
  ventures	
  and	
  land,	
  from	
  net	
  income	
  (loss)	
  
to	
  arrive	
  at	
  FFO	
  in	
  each	
  year	
  presented.	
  

INFLATION	
  

Operators	
  of	
  hotel	
  properties,	
  in	
  general,	
  possess	
  the	
  ability	
  to	
  adjust	
  room	
  rates	
  daily	
  to	
  reflect	
  the	
  

effects	
  of	
  inflation.	
  However,	
  competitive	
  pressures	
  may	
  limit	
  the	
  ability	
  of	
  our	
  management	
  companies	
  to	
  raise	
  
room	
  rates.	
  

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hersha hospitality trust 

CRITICAL	
  ACCOUNTING	
  POLICIES	
  AND	
  ESTIMATES	
  

Our	
  discussion	
  and	
  analysis	
  of	
  our	
  financial	
  condition	
  and	
  results	
  of	
  operations	
  are	
  based	
  upon	
  our	
  

consolidated	
  financial	
  statements,	
  which	
  have	
  been	
  prepared	
  in	
  accordance	
  with	
  accounting	
  principles	
  generally	
  
accepted	
  in	
  the	
  United	
  States.	
  The	
  preparation	
  of	
  these	
  financial	
  statements	
  requires	
  us	
  to	
  make	
  estimates	
  and	
  
judgments	
  that	
  affect	
  the	
  reported	
  amounts	
  of	
  assets,	
  liabilities,	
  revenues	
  and	
  expenses,	
  and	
  related	
  disclosure	
  of	
  
contingent	
  assets	
  and	
  liabilities.	
  

On	
  an	
  on-‐going	
  basis,	
  estimates	
  are	
  evaluated	
  by	
  us,	
  including	
  those	
  related	
  to	
  carrying	
  value	
  of	
  
investments	
  in	
  hotel	
  properties.	
  Our	
  estimates	
  are	
  based	
  upon	
  historical	
  experience	
  and	
  on	
  various	
  other	
  
assumptions	
  we	
  believe	
  to	
  be	
  reasonable	
  under	
  the	
  circumstances,	
  the	
  results	
  of	
  which	
  form	
  the	
  basis	
  for	
  making	
  
judgments	
  about	
  the	
  carrying	
  values	
  of	
  assets	
  and	
  liabilities	
  that	
  are	
  not	
  readily	
  apparent	
  from	
  other	
  sources.	
  
Actual	
  results	
  may	
  differ	
  from	
  these	
  estimates	
  under	
  different	
  assumptions	
  or	
  conditions.	
  

We	
  believe	
  the	
  following	
  critical	
  accounting	
  policies	
  affect	
  our	
  more	
  significant	
  judgments	
  and	
  estimates	
  

used	
  in	
  the	
  preparation	
  of	
  our	
  consolidated	
  financial	
  statements:	
  

Revenue	
  Recognition	
  

Approximately	
  95%	
  of	
  our	
  revenues	
  are	
  derived	
  from	
  hotel	
  room	
  revenues	
  and	
  revenue	
  from	
  other	
  hotel	
  
operating	
  departments.	
  We	
  directly	
  recognize	
  revenue	
  and	
  expense	
  for	
  all	
  consolidated	
  hotels	
  as	
  hotel	
  operating	
  
revenue	
  and	
  hotel	
  operating	
  expense	
  when	
  earned	
  and	
  incurred.	
  These	
  revenues	
  are	
  recorded	
  net	
  of	
  any	
  sales	
  or	
  
occupancy	
  taxes	
  collected	
  from	
  our	
  guests.	
  All	
  revenues	
  are	
  recorded	
  on	
  an	
  accrual	
  basis,	
  as	
  earned.	
  We	
  
participate	
  in	
  frequent	
  guest	
  programs	
  sponsored	
  by	
  the	
  brand	
  owners	
  of	
  our	
  hotels	
  and	
  we	
  expense	
  the	
  charges	
  
associated	
  with	
  those	
  programs,	
  as	
  incurred.	
  

Revenue	
  for	
  interest	
  on	
  development	
  loan	
  financing	
  is	
  recorded	
  in	
  the	
  period	
  earned	
  based	
  on	
  the	
  

interest	
  rate	
  of	
  the	
  loan	
  and	
  outstanding	
  balance	
  during	
  the	
  period.	
  Development	
  loans	
  receivable	
  and	
  accrued	
  
interest	
  on	
  the	
  development	
  loans	
  receivable	
  are	
  evaluated	
  to	
  determine	
  if	
  outstanding	
  balances	
  are	
  collectible.	
  
Interest	
  is	
  recorded	
  only	
  if	
  it	
  is	
  determined	
  the	
  outstanding	
  loan	
  balance	
  and	
  accrued	
  interest	
  balance	
  are	
  
collectible.	
  

Other	
  revenues	
  consist	
  primarily	
  of	
  fees	
  earned	
  for	
  asset	
  management	
  services	
  provided	
  to	
  hotels	
  we	
  own	
  

through	
  unconsolidated	
  joint	
  ventures.	
  Fees	
  are	
  earned	
  as	
  a	
  percentage	
  of	
  hotel	
  revenue	
  and	
  are	
  recorded	
  in	
  the	
  
period	
  earned.	
  

New	
  Accounting	
  Pronouncements	
   	
  

On	
  May	
  28,	
  2014,	
  the	
  FASB	
  issued	
  ASU	
  No.	
  2014-‐09,	
  Revenue	
  from	
  Contracts	
  with	
  Customers,	
  which	
  

requires	
  an	
  entity	
  to	
  recognize	
  the	
  amount	
  of	
  revenue	
  to	
  which	
  it	
  expects	
  to	
  be	
  entitled	
  for	
  the	
  transfer	
  of	
  
promised	
  goods	
  or	
  services	
  to	
  customers.	
  	
  The	
  ASU	
  will	
  replace	
  most	
  existing	
  revenue	
  recognition	
  guidance	
  in	
  U.S.	
  
GAAP	
  when	
  it	
  becomes	
  effective.	
  	
  The	
  new	
  standard	
  is	
  effective	
  for	
  the	
  Company	
  on	
  January	
  1,	
  2017.	
  	
  Early	
  
adoption	
  is	
  not	
  permitted.	
  	
  The	
  standard	
  permits	
  the	
  use	
  of	
  either	
  the	
  retrospective	
  or	
  cumulative	
  effect	
  transition	
  
method.	
  	
  The	
  Company	
  is	
  evaluating	
  the	
  effect	
  that	
  ASU	
  No.	
  2014-‐09	
  will	
  have	
  on	
  its	
  consolidated	
  financial	
  
statements	
  and	
  related	
  disclosures.	
  	
  The	
  Company	
  has	
  not	
  yet	
  selected	
  a	
  transition	
  method	
  nor	
  has	
  it	
  determined	
  
the	
  effect	
  of	
  the	
  standard	
  on	
  its	
  ongoing	
  financial	
  reporting.	
  

Investment	
  in	
  Hotel	
  Properties	
  

Investments	
  in	
  hotel	
  properties	
  are	
  recorded	
  at	
  cost.	
  Improvements	
  and	
  replacements	
  are	
  capitalized	
  

when	
  they	
  extend	
  the	
  useful	
  life	
  of	
  the	
  asset.	
  Costs	
  of	
  repairs	
  and	
  maintenance	
  are	
  expensed	
  as	
  incurred.	
  
Depreciation	
  is	
  computed	
  using	
  the	
  straight-‐line	
  method	
  over	
  the	
  estimated	
  useful	
  life	
  of	
  up	
  to	
  40	
  years	
  for	
  
buildings	
  and	
  improvements,	
  two	
  to	
  seven	
  years	
  for	
  furniture,	
  fixtures	
  and	
  equipment.	
  We	
  are	
  required	
  to	
  make	
  

31 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  
annual report 2014 

subjective	
  assessments	
  as	
  to	
  the	
  useful	
  lives	
  of	
  our	
  properties	
  for	
  purposes	
  of	
  determining	
  the	
  amount	
  of	
  
depreciation	
  to	
  record	
  on	
  an	
  annual	
  basis	
  with	
  respect	
  to	
  our	
  investments	
  in	
  hotel	
  properties.	
  These	
  assessments	
  
have	
  a	
  direct	
  impact	
  on	
  our	
  net	
  income	
  because	
  if	
  we	
  were	
  to	
  shorten	
  the	
  expected	
  useful	
  lives	
  of	
  our	
  investments	
  
in	
  hotel	
  properties	
  we	
  would	
  depreciate	
  these	
  investments	
  over	
  fewer	
  years,	
  resulting	
  in	
  more	
  depreciation	
  
expense	
  and	
  lower	
  net	
  income	
  on	
  an	
  annual	
  basis.	
  

Most	
  identifiable	
  assets,	
  liabilities,	
  noncontrolling	
  interests,	
  and	
  goodwill	
  related	
  to	
  hotel	
  properties	
  

acquired	
  in	
  a	
  business	
  combination	
  are	
  recorded	
  at	
  full	
  fair	
  value.	
  Estimating	
  techniques	
  and	
  assumptions	
  used	
  in	
  
determining	
  fair	
  values	
  involve	
  significant	
  estimates	
  and	
  judgments.	
  These	
  estimates	
  and	
  judgments	
  have	
  a	
  direct	
  
impact	
  on	
  the	
  carrying	
  value	
  of	
  our	
  assets	
  and	
  liabilities	
  which	
  can	
  directly	
  impact	
  the	
  amount	
  of	
  depreciation	
  
expense	
  recorded	
  on	
  an	
  annual	
  basis	
  and	
  could	
  have	
  an	
  impact	
  on	
  our	
  assessment	
  of	
  potential	
  impairment	
  of	
  our	
  
investment	
  in	
  hotel	
  properties.	
  

The	
  operations	
  related	
  to	
  properties	
  that	
  have	
  been	
  sold	
  or	
  properties	
  that	
  are	
  intended	
  to	
  be	
  sold	
  are	
  

presented	
  as	
  discontinued	
  operations	
  in	
  the	
  statement	
  of	
  operations	
  for	
  all	
  periods	
  presented,	
  and	
  properties	
  
intended	
  to	
  be	
  sold	
  are	
  designated	
  as	
  “held	
  for	
  sale”	
  on	
  the	
  balance	
  sheet.	
  

Based	
  on	
  the	
  occurrence	
  of	
  certain	
  events	
  or	
  changes	
  in	
  circumstances,	
  we	
  review	
  the	
  recoverability	
  of	
  

the	
  property’s	
  carrying	
  value.	
  Such	
  events	
  or	
  changes	
  in	
  circumstances	
  include	
  the	
  following:	
  
•	
  
•	
  

a	
  significant	
  decrease	
  in	
  the	
  market	
  price	
  of	
  a	
  long-‐lived	
  asset;	
  
a	
   significant	
   adverse	
   change	
   in	
   the	
   extent	
   or	
   manner	
   in	
   which	
   a	
   long-‐lived	
   asset	
   is	
   being	
   used	
   or	
   in	
   its	
  
physical	
  condition;	
  
a	
   significant	
   adverse	
   change	
   in	
   legal	
   factors	
   or	
   in	
   the	
   business	
   climate	
   that	
   could	
   affect	
   the	
   value	
   of	
   a	
  
long-‐lived	
  asset,	
  including	
  an	
  adverse	
  action	
  or	
  assessment	
  by	
  a	
  regulator;	
  
an	
   accumulation	
   of	
   costs	
   significantly	
   in	
   excess	
   of	
   the	
   amount	
   originally	
   expected	
   for	
   the	
   acquisition	
   or	
  
construction	
  of	
  a	
  long-‐lived	
  asset;	
  
a	
  current-‐period	
  operating	
  or	
  cash	
  flow	
  loss	
  combined	
  with	
  a	
  history	
  of	
  operating	
  or	
  cash	
  flow	
  losses	
  or	
  a	
  
projection	
  or	
  forecast	
  that	
  demonstrates	
  continuing	
  losses	
  associated	
  with	
  the	
  use	
  of	
  a	
  long-‐lived	
  asset;	
  
and	
  
a	
   current	
   expectation	
   that,	
   it	
   is	
   more	
   likely	
   than	
   not	
   that,	
   a	
   long-‐lived	
   asset	
   will	
   be	
   sold	
   or	
   otherwise	
  
disposed	
  of	
  significantly	
  before	
  the	
  end	
  of	
  its	
  previously	
  estimated	
  useful	
  life.	
  

•	
  

•	
  

•	
  

•	
  

We	
  review	
  our	
  portfolio	
  on	
  an	
  on-‐going	
  basis	
  to	
  evaluate	
  the	
  existence	
  of	
  any	
  of	
  the	
  aforementioned	
  

events	
  or	
  changes	
  in	
  circumstances	
  that	
  would	
  require	
  us	
  to	
  test	
  for	
  recoverability.	
  In	
  general,	
  our	
  review	
  of	
  
recoverability	
  is	
  based	
  on	
  an	
  estimate	
  of	
  the	
  future	
  undiscounted	
  cash	
  flows,	
  excluding	
  interest	
  charges,	
  expected	
  
to	
  result	
  from	
  the	
  property’s	
  use	
  and	
  eventual	
  disposition.	
  These	
  estimates	
  consider	
  factors	
  such	
  as	
  expected	
  
future	
  operating	
  income,	
  market	
  and	
  other	
  applicable	
  trends	
  and	
  residual	
  value	
  expected,	
  as	
  well	
  as	
  the	
  effects	
  of	
  
hotel	
  demand,	
  competition	
  and	
  other	
  factors.	
  If	
  impairment	
  exists	
  due	
  to	
  the	
  inability	
  to	
  recover	
  the	
  carrying	
  value	
  
of	
  a	
  property,	
  an	
  impairment	
  loss	
  is	
  recorded	
  to	
  the	
  extent	
  that	
  the	
  carrying	
  value	
  exceeds	
  the	
  estimated	
  fair	
  value	
  
of	
  the	
  property.	
  We	
  are	
  required	
  to	
  make	
  subjective	
  assessments	
  as	
  to	
  whether	
  there	
  are	
  impairments	
  in	
  the	
  
values	
  of	
  our	
  investments	
  in	
  hotel	
  properties.	
  

As	
  of	
  December	
  31,	
  2014,	
  based	
  on	
  our	
  analysis,	
  we	
  have	
  determined	
  that	
  the	
  future	
  cash	
  flow	
  of	
  each	
  of	
  

the	
  properties	
  in	
  our	
  portfolio	
  is	
  sufficient	
  to	
  recover	
  its	
  carrying	
  value.	
  

Investment	
  in	
  Joint	
  Ventures	
  

Properties	
  owned	
  in	
  joint	
  ventures	
  are	
  consolidated	
  if	
  the	
  determination	
  is	
  made	
  that	
  we	
  are	
  the	
  primary	
  

beneficiary	
  in	
  a	
  variable	
  interest	
  entity	
  (VIE)	
  or	
  we	
  maintain	
  control	
  of	
  the	
  asset	
  through	
  our	
  voting	
  interest	
  or	
  
other	
  rights	
  in	
  the	
  operation	
  of	
  the	
  entity.	
  To	
  determine	
  if	
  we	
  are	
  the	
  primary	
  beneficiary	
  of	
  a	
  VIE,	
  we	
  evaluate	
  
whether	
  we	
  have	
  a	
  controlling	
  financial	
  interest	
  in	
  that	
  VIE.	
  An	
  enterprise	
  is	
  deemed	
  to	
  have	
  a	
  controlling	
  financial	
  
interest	
  if	
  it	
  has	
  i)	
  the	
  power	
  to	
  direct	
  the	
  activities	
  of	
  a	
  variable	
  interest	
  entity	
  that	
  most	
  significantly	
  impact	
  the	
  
entity’s	
  economic	
  performance,	
  and	
  ii)	
  the	
  obligation	
  to	
  absorb	
  losses	
  of	
  the	
  VIE	
  that	
  could	
  be	
  significant	
  to	
  the	
  VIE	
  

32 

	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
hersha hospitality trust 

or	
  the	
  rights	
  to	
  receive	
  benefits	
  from	
  the	
  VIE	
  that	
  could	
  be	
  significant	
  to	
  the	
  VIE.	
  Control	
  can	
  also	
  be	
  demonstrated	
  
by	
  the	
  ability	
  of	
  a	
  member	
  to	
  manage	
  day-‐to-‐day	
  operations,	
  refinance	
  debt	
  and	
  sell	
  the	
  assets	
  of	
  the	
  partnerships	
   	
  
without	
  the	
  consent	
  of	
  the	
  other	
  member	
  and	
  the	
  inability	
  of	
  the	
  members	
  to	
  replace	
  the	
  managing	
  member.	
  This	
  
evaluation	
  requires	
  significant	
  judgment.	
  

If	
  it	
  is	
  determined	
  that	
  we	
  do	
  not	
  have	
  a	
  controlling	
  interest	
  in	
  a	
  joint	
  venture,	
  either	
  through	
  our	
  financial	
  

interest	
  in	
  a	
  VIE	
  or	
  our	
  voting	
  interest	
  in	
  a	
  voting	
  interest	
  entity,	
  the	
  equity	
  method	
  of	
  accounting	
  is	
  used.	
  Under	
  
this	
  method,	
  the	
  investment,	
  originally	
  recorded	
  at	
  cost,	
  is	
  adjusted	
  to	
  recognize	
  our	
  share	
  of	
  net	
  earnings	
  or	
  losses	
  
of	
  the	
  affiliates	
  as	
  they	
  occur	
  rather	
  than	
  as	
  dividends	
  or	
  other	
  distributions	
  are	
  received,	
  limited	
  to	
  the	
  extent	
  of	
  
our	
  investment	
  in,	
  advances	
  to	
  and	
  commitments	
  for	
  the	
  investee.	
  Pursuant	
  to	
  our	
  joint	
  venture	
  agreements,	
  
allocations	
  of	
  profits	
  and	
  losses	
  of	
  some	
  of	
  our	
  investments	
  in	
  unconsolidated	
  joint	
  ventures	
  may	
  be	
  allocated	
  
disproportionately	
  as	
  compared	
  to	
  nominal	
  ownership	
  percentages	
  due	
  to	
  specified	
  preferred	
  return	
  rate	
  
thresholds.	
  

The	
  Company	
  periodically	
  reviews	
  the	
  carrying	
  value	
  of	
  its	
  investment	
  in	
  unconsolidated	
  joint	
  ventures	
  to	
  

determine	
  if	
  circumstances	
  exist	
  indicating	
  impairment	
  to	
  the	
  carrying	
  value	
  of	
  the	
  investment	
  that	
  is	
  other	
  than	
  
temporary.	
  When	
  an	
  impairment	
  indicator	
  is	
  present,	
  we	
  will	
  estimate	
  the	
  fair	
  value	
  of	
  the	
  investment.	
  Our	
  
estimate	
  of	
  fair	
  value	
  takes	
  into	
  consideration	
  factors	
  such	
  as	
  expected	
  future	
  operating	
  income,	
  trends	
  and	
  
prospects,	
  as	
  well	
  as	
  the	
  effects	
  of	
  demand,	
  competition	
  and	
  other	
  factors.	
  This	
  determination	
  requires	
  significant	
  
estimates	
  by	
  management,	
  including	
  the	
  expected	
  cash	
  flows	
  to	
  be	
  generated	
  by	
  the	
  assets	
  owned	
  and	
  operated	
  
by	
  the	
  joint	
  venture.	
  Subsequent	
  changes	
  in	
  estimates	
  could	
  impact	
  the	
  determination	
  of	
  whether	
  impairment	
  
exists.	
  To	
  the	
  extent	
  impairment	
  has	
  occurred,	
  the	
  loss	
  will	
  be	
  measured	
  as	
  the	
  excess	
  of	
  the	
  carrying	
  amount	
  over	
  
the	
  fair	
  value	
  of	
  our	
  investment	
  in	
  the	
  unconsolidated	
  joint	
  venture.	
  

Accounting	
  for	
  Derivative	
  Financial	
  Investments	
  and	
  Hedging	
  Activities	
  

We	
  use	
  derivatives	
  to	
  hedge,	
  fix	
  and	
  cap	
  interest	
  rate	
  risk	
  and	
  we	
  account	
  for	
  our	
  derivative	
  and	
  hedging	
  

activities	
  by	
  recording	
  all	
  derivative	
  instruments	
  at	
  fair	
  value	
  on	
  the	
  balance	
  sheet.	
  Derivative	
  instruments	
  
designated	
  in	
  a	
  hedge	
  relationship	
  to	
  mitigate	
  exposure	
  to	
  variability	
  in	
  expected	
  future	
  cash	
  flows,	
  or	
  other	
  types	
  
of	
  forecasted	
  transactions,	
  are	
  considered	
  cash	
  flow	
  hedges.	
  We	
  formally	
  document	
  all	
  relationships	
  between	
  
hedging	
  instruments	
  and	
  hedged	
  items,	
  as	
  well	
  as	
  our	
  risk-‐management	
  objective	
  and	
  strategy	
  for	
  undertaking	
  
each	
  hedge	
  transaction.	
  Cash	
  flow	
  hedges	
  that	
  are	
  considered	
  highly	
  effective	
  are	
  accounted	
  for	
  by	
  recording	
  the	
  
fair	
  value	
  of	
  the	
  derivative	
  instrument	
  on	
  the	
  balance	
  sheet	
  as	
  either	
  an	
  asset	
  or	
  liability,	
  with	
  a	
  corresponding	
  
amount	
  recorded	
  in	
  other	
  comprehensive	
  income	
  within	
  shareholders’	
  equity.	
  Amounts	
  are	
  reclassified	
  from	
  other	
  
comprehensive	
  income	
  to	
  the	
  income	
  statements	
  in	
  the	
  period	
  or	
  periods	
  the	
  hedged	
  forecasted	
  transaction	
  
affects	
  earnings.	
  

Under	
  cash	
  flow	
  hedges,	
  derivative	
  gains	
  and	
  losses	
  not	
  considered	
  highly	
  effective	
  in	
  hedging	
  the	
  change	
  

in	
  expected	
  cash	
  flows	
  of	
  the	
  hedged	
  item	
  are	
  recognized	
  immediately	
  in	
  the	
  income	
  statement.	
  For	
  hedge	
  
transactions	
  that	
  do	
  not	
  qualify	
  for	
  the	
  short-‐cut	
  method,	
  at	
  the	
  hedge’s	
  inception	
  and	
  on	
  a	
  regular	
  basis	
  
thereafter,	
  a	
  formal	
  assessment	
  is	
  performed	
  to	
  determine	
  whether	
  changes	
  in	
  the	
  cash	
  flows	
  of	
  the	
  derivative	
  
instruments	
  have	
  been	
  highly	
  effective	
  in	
  offsetting	
  changes	
  in	
  cash	
  flows	
  of	
  the	
  hedged	
  items	
  and	
  whether	
  they	
  
are	
  expected	
  to	
  be	
  highly	
  effective	
  in	
  the	
  future.	
  

RELATED	
  PARTY	
  TRANSACTIONS	
  

We	
  have	
  entered	
  into	
  a	
  number	
  of	
  transactions	
  and	
  arrangements	
  that	
  involve	
  related	
  parties.	
  For	
  a	
  
description	
  of	
  the	
  transactions	
  and	
  arrangements,	
  please	
  see	
  Note	
  6,	
  “Commitments	
  and	
  Contingencies	
  and	
  
Related	
  Party	
  Transactions,”	
  to	
  the	
  consolidated	
  financial	
  statements.	
  

33 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

CONTRACTUAL	
  OBLIGATIONS	
  AND	
  COMMERCIAL	
  COMMITMENTS	
  

The	
  following	
  table	
  summarizes	
  our	
  contractual	
  obligations	
  and	
  commitments	
  to	
  make	
  future	
  payments	
  

under	
  contracts,	
  such	
  as	
  debt	
  and	
  lease	
  agreements,	
  as	
  of	
  December	
  31,	
  2014.	
  

Contractual	
  Obligations	
  

2015	
  

2016	
  

2017	
  

2018	
  

2019	
  

Thereafter	
  

Long	
  Term	
  Debt	
  

	
   $	
  

	
   69,063	
  	
  	
   $	
  

	
   273,824	
  	
  	
   $	
  

	
   204,219	
  	
  	
   $	
  

	
   1,564	
  	
  	
   $	
  

	
   44,892	
  	
  	
   $	
  

	
   73,777	
  	
  

Interest	
  Expense	
  on	
  Long	
  Term	
  Debt	
  

	
   29,450	
  	
  	
  

	
   22,908	
  	
  	
  

	
   5,155	
  	
  	
  

	
   3,730	
  	
  	
  

	
   3,541	
  	
  	
  

	
   31,072	
  	
  

Unsecured	
  Term	
  Loan	
   	
  

Unsecured	
  Line	
  of	
  Credit	
  
Interest	
  Expense	
  on	
  Unsecured	
  Term	
  
Loan	
  

Hotel	
  Ground	
  Rent	
  

	
   	
   	
   Total	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   250,000	
  	
  	
  

	
   -‐	
  	
  

	
   7,320	
  	
  	
  

	
   2,342	
  	
  	
  

	
   7,320	
  	
  	
  

	
   2,374	
  	
  	
  

	
   7,320	
  	
  	
  

	
   2,374	
  	
  	
  

	
   7,320	
  	
  	
  

	
   2,374	
  	
  	
  

	
   651	
  	
  	
  

	
   2,374	
  	
  	
  

	
   -‐	
  

	
   -‐	
  

	
   -‐	
  

	
   229,028	
  	
  

	
   $	
  

	
   108,175	
  	
  	
   $	
  

	
   306,426	
  	
  	
   $	
  

	
   219,068	
  	
  	
   $	
  

	
   14,988	
  	
  	
   $	
  

	
   301,458	
  	
  	
   $	
  

	
   333,877	
  	
  

From	
  time	
  to	
  time,	
  we	
  acquire	
  properties	
  subject	
  to	
  an	
  obligation	
  to	
  pay	
  contingent	
  consideration	
  

arrangements	
  with	
  the	
  former	
  owner	
  if	
  specified	
  operating	
  objectives	
  are	
  achieved	
  by	
  the	
  acquired	
  entity.	
  Our	
  
current	
  maximum	
  cash	
  payment	
  under	
  this	
  arrangement	
  is	
  $2,000	
  in	
  2015	
  the	
  Parrot	
  Key	
  Resort	
  in	
  Key	
  West,	
  FL.	
  
As	
  of	
  December	
  31,	
  2014,	
  we	
  recorded	
  the	
  full	
  amount	
  of	
  contingent	
  consideration	
  as	
  we	
  believe	
  the	
  likelihood	
  of	
  
the	
  hotel	
  achieving	
  the	
  specific	
  operating	
  targets	
  is	
  probable.	
  

34 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

Item	
  7A.	
  

Quantitative	
  and	
  Qualitative	
  Disclosures	
  About	
  Market	
  Risk	
  (in	
  thousands,	
  except	
  per	
  
share	
  data)	
  

Our	
  primary	
  market	
  risk	
  exposure	
  is	
  to	
  changes	
  in	
  interest	
  rates	
  on	
  our	
  variable	
  rate	
  debt	
  which	
  has	
  not	
  

been	
  effectively	
  hedged	
  with	
  interest	
  swaps	
  or	
  interest	
  rate	
  caps.	
  As	
  of	
  December	
  31,	
  2014,	
  we	
  are	
  exposed	
  to	
  
interest	
  rate	
  risk	
  with	
  respect	
  to	
  variable	
  rate	
  borrowings	
  under	
  our	
  $500,000	
  credit	
  facility	
  and	
  certain	
  variable	
  
rate	
  mortgages	
  and	
  notes	
  payable.	
  As	
  of	
  December	
  31,	
  2014,	
  we	
  had	
  total	
  variable	
  rate	
  debt	
  outstanding	
  of	
  
$298,048	
  with	
  a	
  weighted	
  average	
  interest	
  rate	
  of	
  3.04%.	
  The	
  effect	
  of	
  a	
  100	
  basis	
  point	
  increase	
  or	
  decrease	
  in	
  the	
  
interest	
  rate	
  on	
  our	
  variable	
  rate	
  debt	
  outstanding	
  as	
  of	
  December	
  31,	
  2014	
  would	
  be	
  an	
  increase	
  or	
  decrease	
  in	
  
our	
  interest	
  expense	
  for	
  the	
  twelve	
  months	
  ended	
  December	
  31,	
  2014	
  of	
  $2,083.	
  

Our	
  interest	
  rate	
  risk	
  objectives	
  are	
  to	
  limit	
  the	
  impact	
  of	
  interest	
  rate	
  fluctuations	
  on	
  earnings	
  and	
  cash	
  

flows	
  and	
  to	
  lower	
  our	
  overall	
  borrowing	
  costs.	
  To	
  achieve	
  these	
  objectives,	
  we	
  manage	
  our	
  exposure	
  to	
  
fluctuations	
  in	
  market	
  interest	
  rates	
  for	
  a	
  portion	
  of	
  our	
  borrowings	
  through	
  the	
  use	
  of	
  fixed	
  rate	
  debt	
  instruments	
  
to	
  the	
  extent	
  that	
  reasonably	
  favorable	
  rates	
  are	
  obtainable	
  with	
  such	
  arrangements.	
  We	
  have	
  also	
  entered	
  into	
  
derivative	
  financial	
  instruments	
  such	
  as	
  interest	
  rate	
  swaps	
  or	
  caps,	
  and	
  in	
  the	
  future	
  may	
  enter	
  into	
  treasury	
  
options	
  or	
  locks,	
  to	
  mitigate	
  our	
  interest	
  rate	
  risk	
  on	
  a	
  related	
  financial	
  instrument	
  or	
  to	
  effectively	
  lock	
  the	
  interest	
  
rate	
  on	
  a	
  portion	
  of	
  our	
  variable	
  rate	
  debt.	
  As	
  of	
  December	
  31,	
  2014,	
  we	
  have	
  an	
  interest	
  rate	
  cap	
  related	
  to	
  debt	
  
on	
  the	
  Hilton	
  Garden	
  Inn,	
  52nd	
  Street,	
  New	
  York,	
  Hyatt	
  Union	
  Square,	
  New	
  York,	
  NY	
  and	
  our	
  two	
  subordinated	
  
notes	
  payable,	
  and	
  we	
  have	
  six	
  interest	
  rate	
  swaps	
  related	
  to	
  debt	
  on	
  the	
  Courtyard	
  by	
  Marriott,	
  Westside,	
  Los	
  
Angeles,	
  CA,	
  Capitol	
  Hill	
  Hotel,	
  Washington	
  DC,	
  Courtyard	
  by	
  Marriott,	
  Miami	
  Beach,	
  FL,	
  Duane	
  Street	
  Hotel,	
  New	
  
York,	
  NY,	
  and	
  our	
  unsecured	
  credit	
  facility.	
  We	
  do	
  not	
  intend	
  to	
  enter	
  into	
  derivative	
  or	
  interest	
  rate	
  transactions	
  
for	
  speculative	
  purposes.	
  

As	
  of	
  December	
  31,	
  2014	
  approximately	
  84%	
  of	
  our	
  outstanding	
  consolidated	
  long-‐term	
  indebtedness	
  is	
  

subject	
  to	
  fixed	
  rates	
  or	
  effectively	
  capped,	
  while	
  16%	
  of	
  our	
  outstanding	
  long	
  term	
  indebtedness	
  is	
  subject	
  to	
  
floating	
  rates,	
  including	
  borrowings	
  under	
  our	
  revolving	
  credit	
  facility.	
  

Changes	
  in	
  market	
  interest	
  rates	
  on	
  our	
  fixed-‐rate	
  debt	
  impact	
  the	
  fair	
  value	
  of	
  the	
  debt,	
  but	
  such	
  changes	
  

have	
  no	
  impact	
  on	
  interest	
  expense	
  incurred.	
  If	
  interest	
  rates	
  rise	
  100	
  basis	
  points	
  and	
  our	
  fixed	
  rate	
  debt	
  balance	
  
remains	
  constant,	
  we	
  expect	
  the	
  fair	
  value	
  of	
  our	
  debt	
  to	
  decrease.	
  The	
  sensitivity	
  analysis	
  related	
  to	
  our	
  fixed-‐rate	
  
debt	
  assumes	
  an	
  immediate	
  100	
  basis	
  point	
  move	
  in	
  interest	
  rates	
  from	
  their	
  December	
  31,	
  2014	
  levels,	
  with	
  all	
  
other	
  variables	
  held	
  constant.	
  A	
  100	
  basis	
  point	
  increase	
  in	
  market	
  interest	
  rates	
  would	
  cause	
  the	
  fair	
  value	
  of	
  our	
  
fixed-‐rate	
  debt	
  outstanding	
  at	
  December	
  31,	
  2014	
  to	
  be	
  approximately	
  $901,571	
  and	
  a	
  100	
  basis	
  point	
  decrease	
  in	
  
market	
  interest	
  rates	
  would	
  cause	
  the	
  fair	
  value	
  of	
  our	
  fixed-‐rate	
  debt	
  outstanding	
  at	
  December	
  31,	
  2014	
  to	
  be	
  
approximately	
  $932,755.	
  

2015	
  

2016	
  

2017	
  

	
   	
   2018	
  

2019	
  

	
   	
   Thereafter	
  	
   	
  

Total	
  

Fixed	
  Rate	
  Debt	
  

	
   $	
   	
   69,063	
   	
  $	
  	
   218,824	
   	
  $	
  	
   203,172	
   	
  $	
  

	
   491	
   	
  $	
   	
   150,513	
   	
  $	
  

Weighted	
  Average	
  Interest	
  Rate	
   	
  

	
   4.77%	
   	
  

4.29%	
   	
  

3.36%	
   	
  

	
   3.36%	
   	
  

4.40%	
   	
  

	
   22,229	
   	
  $	
  
4.40%	
   	
  

	
   664,292	
  
4.10%	
  

Floating	
  Rate	
  Debt	
  

	
   $	
  

	
   -‐	
   	
  $	
   	
   55,000	
   	
  $	
  

Weighted	
  Average	
  Interest	
  Rate	
   	
  

	
   3.04%	
   	
  

2.68%	
   	
  

	
   1,047	
   	
  $	
  
2.68%	
   	
  

	
   1,073	
   	
  $	
   	
   144,379	
   	
  $	
  

	
   2.68%	
   	
  

3.17%	
   	
  

	
   51,548	
   	
  $	
  
3.17%	
   	
  

	
   253,047	
  
2.88%	
  

	
   $	
   	
   69,063	
   	
  $	
  	
   273,824	
   	
  $	
  	
   204,219	
   	
  $	
  

	
   1,564	
   	
  $	
   	
   294,892	
   	
  $	
  

	
   73,777	
   	
  $	
  

	
   917,339	
  

Line	
  of	
  Credit	
  Facility	
  

	
   $	
  

Weighted	
  Average	
  Interest	
  Rate	
   	
  

	
   -‐	
   	
  $	
  
  -    

	
   -‐	
   	
  $	
  
  -     

	
   -‐	
   	
  $	
  
  - 

	
   -‐	
   	
  $	
  

	
   2.62%	
   	
  

	
   -‐	
   	
  $	
  
	
   -‐	
   	
  

	
   -‐	
   	
  $	
  
	
   -‐	
   	
  

	
  	
   $	
   	
   69,063	
   	
  $	
  	
   273,824	
   	
  $	
  	
   204,219	
   	
  $	
  

	
   1,564	
   	
  $	
   	
   294,892	
   	
  $	
  

	
   73,777	
   	
  $	
  

	
   -‐	
  
2.62%	
  
	
   917,339	
  

The	
  table	
  incorporates	
  only	
  those	
  exposures	
  that	
  existed	
  as	
  of	
  December	
  31,	
  2014,	
  and	
  does	
  not	
  consider	
  
exposure	
  or	
  positions	
  that	
  could	
  arise	
  after	
  that	
  date.	
  As	
  a	
  result,	
  our	
  ultimate	
  realized	
  gain	
  or	
  loss	
  with	
  respect	
  to	
  
interest	
  rate	
  fluctuations	
  will	
  depend	
  on	
  the	
  exposures	
  that	
  arise	
  during	
  the	
  future	
  period,	
  prevailing	
  interest	
  rates,	
  
and	
  our	
  hedging	
  strategies	
  at	
  that	
  time.	
  

35 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
  
	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
   	
   	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
  	
  
	
  
  	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
     
     
     
     
     
     
     
annual report 2014 

Item	
  8.	
   	
  

Financial	
  Statements	
  and	
  Supplementary	
  Data	
  

Hersha	
  Hospitality	
  Trust	
  

	
   	
   Report	
  of	
  Independent	
  Registered	
  Public	
  Accounting	
  Firm	
  
	
   	
   Consolidated	
  Balance	
  Sheets	
  as	
  of	
  December	
  31,	
  2014	
  and	
  2013	
  
	
   	
   Consolidated	
  Statement	
  of	
  Operations	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012	
  
	
   	
   Consolidated	
  Statements	
  of	
  Comprehensive	
  Income	
  (Loss)	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  

and	
  2012	
  

	
   	
   Consolidated	
  Statements	
  of	
  Equity	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  2012	
  
	
   	
   Consolidated	
  Statements	
  of	
  Cash	
  Flows	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  2012	
  
	
   	
   Notes	
  to	
  Consolidated	
  Financial	
  Statements	
  
	
   	
   Schedule	
  III	
  -‐	
  Real	
  Estate	
  and	
  Accumulated	
  Depreciation	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  

Page	
  

37	
  
38	
  
39	
  

41	
  
42	
  
44	
  
46	
  
88	
  

36 

	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust 

Report	
  of	
  Independent	
  Registered	
  Public	
  Accounting	
  Firm	
  

The	
  Board	
  of	
  Trustees	
  and	
  Shareholders	
  of	
  
Hersha	
  Hospitality	
  Trust:	
  

We	
  have	
  audited	
  the	
  accompanying	
  consolidated	
  balance	
  sheets	
  of	
  Hersha	
  Hospitality	
  Trust	
  and	
  subsidiaries	
  as	
  of	
  
December	
  31,	
  2014	
  and	
  2013,	
  and	
  the	
  related	
  consolidated	
  statements	
  of	
  operations,	
  comprehensive	
  income,	
  
equity,	
  and	
  cash	
  flows	
  for	
  each	
  of	
  the	
  years	
  in	
  the	
  three-‐year	
  period	
  ended	
  December	
  31,	
  2014.	
  In	
  connection	
  with	
  
our	
  audits	
  of	
  the	
  consolidated	
  financial	
  statements,	
  we	
  have	
  also	
  audited	
  the	
  financial	
  statement	
  schedule	
  as	
  listed	
  
in	
  the	
  accompanying	
  index.	
  	
  These	
  consolidated	
  financial	
  statements	
  and	
  financial	
  statement	
  schedule	
  are	
  the	
  
responsibility	
  of	
  Hersha	
  Hospitality	
  Trust’s	
  management.	
   	
   Our	
  responsibility	
  is	
  to	
  express	
  an	
  opinion	
  on	
  these	
  
consolidated	
  financial	
  statements	
  and	
  financial	
  statement	
  schedule	
  based	
  on	
  our	
  audits.	
  

We	
  conducted	
  our	
  audits	
  in	
  accordance	
  with	
  the	
  standards	
  of	
  the	
  Public	
  Company	
  Accounting	
  Oversight	
  Board	
  
(United	
  States).	
  Those	
  standards	
  require	
  that	
  we	
  plan	
  and	
  perform	
  the	
  audit	
  to	
  obtain	
  reasonable	
  assurance	
  about	
  
whether	
  the	
  financial	
  statements	
  are	
  free	
  of	
  material	
  misstatement.	
  	
  An	
  audit	
  includes	
  examining,	
  on	
  a	
  test	
  basis,	
  
evidence	
  supporting	
  the	
  amounts	
  and	
  disclosures	
  in	
  the	
  financial	
  statements.	
  	
  An	
  audit	
  also	
  includes	
  assessing	
  the	
  
accounting	
  principles	
  used	
  and	
  significant	
  estimates	
  made	
  by	
  management,	
  as	
  well	
  as	
  evaluating	
  the	
  overall	
  
financial	
  statement	
  presentation.	
  	
  We	
  believe	
  that	
  our	
  audits	
  provide	
  a	
  reasonable	
  basis	
  for	
  our	
  opinion.	
  

In	
  our	
  opinion,	
  the	
  consolidated	
  financial	
  statements	
  referred	
  to	
  above	
  present	
  fairly,	
  in	
  all	
  material	
  respects,	
  the	
  
financial	
  position	
  of	
  Hersha	
  Hospitality	
  Trust	
  and	
  subsidiaries	
  as	
  of	
  December	
  31,	
  2014	
  and	
  2013,	
  and	
  the	
  results	
  of	
  
their	
  operations	
  and	
  their	
  cash	
  flows	
  for	
  each	
  of	
  the	
  years	
  in	
  the	
  three-‐year	
  period	
  ended	
  December	
  31,	
  2014,	
  in	
  
conformity	
  with	
  U.S.	
  generally	
  accepted	
  accounting	
  principles.	
  Also	
  in	
  our	
  opinion,	
  the	
  related	
  financial	
  statement	
  
schedule,	
  when	
  considered	
  in	
  relation	
  to	
  the	
  basic	
  consolidated	
  financial	
  statements	
  taken	
  as	
  a	
  whole,	
  presents	
  
fairly,	
  in	
  all	
  material	
  respects,	
  the	
  information	
  set	
  forth	
  therein.	
  

As	
  discussed	
  in	
  Note	
  11	
  to	
  the	
  consolidated	
  financial	
  statements,	
  the	
  Company	
  has	
  changed	
  its	
  method	
  for	
  
reporting	
  discontinued	
  operations	
  as	
  of	
  January	
  1,	
  2014.	
  

We	
  have	
  also	
  audited,	
  in	
  accordance	
  with	
  the	
  standards	
  of	
  the	
  Public	
  Company	
  Accounting	
  Oversight	
  Board	
  
(United	
  States),	
  Hersha	
  Hospitality	
  Trust’s	
  internal	
  control	
  over	
  financial	
  reporting	
  as	
  of	
  December	
  31,	
  2014,	
  based	
  
on	
  criteria	
  established	
  in	
  Internal	
  Control	
  -‐	
  Integrated	
  Framework	
  (2013)	
  issued	
  by	
  the	
  Committee	
  of	
  Sponsoring	
  
Organizations	
  of	
  the	
  Treadway	
  Commission	
  (COSO),	
  and	
  our	
  report	
  dated	
  February	
  20,	
  2015,	
  expressed	
  an	
  
unqualified	
  opinion	
  on	
  the	
  effectiveness	
  of	
  Hersha	
  Hospitality	
  Trust’s	
  internal	
  control	
  over	
  financial	
  reporting.	
  

/s/	
  KPMG	
  LLP	
  

Philadelphia,	
  Pennsylvania	
  
February	
  20,	
  2015	
  

37 

	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
 
  
hersha hospitality trust and subsidiaries 
consolidated balance sheets 
as of december 31, 2014 and 2013 
[in thousands, except share/unit and per share amounts] 

Assets:	
  

Investment	
  in	
  Hotel	
  Properties,	
  Net	
  of	
  Accumulated	
  Depreciation,	
  Including	
  
Consolidation	
  of	
  Variable	
  Interest	
  Entity	
  Assets	
  of	
  $84,247	
  and	
  $85,759	
  
Investment	
  in	
  Unconsolidated	
  Joint	
  Ventures	
  
Cash	
  and	
  Cash	
  Equivalents	
  
Escrow	
  Deposits	
  
Hotel	
  Accounts	
  Receivable,	
  Net	
  of	
  Allowance	
  for	
  Doubtful	
  Accounts	
  of	
  $39	
  and	
  $43	
  
Deferred	
  Financing	
  Costs,	
  Net	
  of	
  Accumulated	
  Amortization	
  of	
  $6,938	
  and	
  $7,070	
  
Due	
  from	
  Related	
  Parties	
  
Intangible	
  Assets,	
  Net	
  of	
  Accumulated	
  Amortization	
  of	
  $3,514	
  and	
  $3,227	
  
Deposits	
  on	
  Hotel	
  Acquisitions	
  
Other	
  Assets	
  
Hotel	
  Assets	
  Held	
  for	
  Sale	
  

Total	
  Assets	
  

Liabilities	
  and	
  Equity:	
  

Line	
  of	
  Credit	
  
Unsecured	
  Term	
  Loan	
  
Unsecured	
  Notes	
  Payable	
  

Mortgages	
  Payable,	
  including	
  Net	
  Unamortized	
  Premium	
  and	
  Consolidation	
  of	
  Variable	
  
Interest	
  Entity	
  Debt	
  of	
  $54,132	
  and	
  $55,714	
  
Accounts	
  Payable,	
  Accrued	
  Expenses	
  and	
  Other	
  Liabilities	
  
Dividends	
  and	
  Distributions	
  Payable	
  
Due	
  to	
  Related	
  Parties	
  
Liabilities	
  Related	
  to	
  Hotel	
  Assets	
  Held	
  for	
  Sale	
  

Total	
  Liabilities	
  

Equity:	
  

Shareholders'	
  Equity:	
  

Preferred	
  Shares:	
   	
   $.01	
  Par	
  Value,	
  29,000,000	
  Shares	
  Authorized,	
  4,600,000	
  Series	
  B	
  
and	
  3,000,000	
  Series	
  C	
  Shares	
  Issued	
  and	
  Outstanding	
  at	
  December	
  31,	
  2014	
  and	
  
December	
  31,	
  2013,	
  with	
  Liquidation	
  Preferences	
  of	
  $25	
  Per	
  Share	
  (Note	
  1)	
  

Common	
  Shares:	
   	
   Class	
  A,	
  $.01	
  Par	
  Value,	
  300,000,000	
  Shares	
  Authorized	
  at	
  
December	
  31,	
  2014	
  and	
  December	
  31,	
  2013,	
  198,835,083	
  and	
  202,759,419	
  Shares	
  
Issued	
  and	
  Outstanding	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013,	
  respectively	
  

Common	
  Shares:	
   	
   Class	
  B,	
  $.01	
  Par	
  Value,	
  1,000,000	
  Shares	
  Authorized,	
  None	
  Issued	
  
and	
  Outstanding	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  
Accumulated	
  Other	
  Comprehensive	
  Loss	
  
Additional	
  Paid-‐in	
  Capital	
  
Distributions	
  in	
  Excess	
  of	
  Net	
  Income	
  

Total	
  Shareholders'	
  Equity	
  

Noncontrolling	
  Interests	
  (Note	
  1):	
  

Noncontrolling	
  Interests	
  -‐	
  Common	
  Units	
  
Noncontrolling	
  Interests	
  -‐	
  Consolidated	
  Variable	
  Interest	
  Entity	
  

Total	
  Noncontrolling	
  Interests	
  

	
   December	
  31,	
  2014	
  

	
   December	
  31,	
  2013	
  

$	
  

$	
  

$	
  

$	
  

$	
  

	
   1,745,483	
  	
  	
  
	
   11,150	
  	
  	
  
	
   21,675	
  	
  	
  
	
   16,941	
  	
  	
  
	
   9,363	
  	
  	
  
	
   8,605	
  	
  	
  
	
   6,580	
  	
  	
  
	
   7,316	
  	
  	
  
	
   -‐	
  	
  
	
   28,426	
  	
  	
  
	
   -‐	
  	
  
	
   1,855,539	
  	
  	
  

	
   -‐	
  
	
   250,000	
  	
  
	
   51,548	
  	
  

	
   617,375	
  	
  
	
   54,115	
  	
  
	
   17,909	
  	
  
	
   7,203	
  	
  
	
   -‐	
  
	
   998,150	
  	
  	
  

$	
  

$	
  

	
   $	
  

$	
  

	
   1,535,835	
  	
  
	
   12,044	
  	
  
	
   36,213	
  	
  
	
   25,938	
  	
  
	
   9,141	
  	
  
	
   7,570	
  	
  
	
   11,124	
  	
  
	
   7,603	
  	
  
	
   18,586	
  	
  
	
   27,460	
  	
  
	
   56,583	
  	
  
	
   1,748,097	
  	
  

	
   -‐	
  
	
   150,000	
  	
  
	
   51,548	
  	
  

	
   571,953	
  	
  
	
   40,852	
  	
  
	
   15,955	
  	
  
	
   4,815	
  	
  
	
   45,835	
  	
  
	
   880,958	
  	
  

	
   76	
  	
  

	
   $	
  

	
   76	
  	
  

	
   1,989	
  	
  

	
   2,028	
  	
  

	
   -‐	
  
	
   (358)	
  
	
   1,193,056	
  	
  
	
   (365,381)	
  
	
   829,382	
  	
  

	
   29,082	
  	
  
	
   (1,075)	
  
	
   28,007	
  	
  

	
   -‐	
  
	
   (376)	
  
	
   1,200,798	
  	
  
	
   (364,568)	
  
	
   837,958	
  	
  

	
   29,523	
  	
  
	
   (342)	
  
	
   29,181	
  	
  

Total	
  Equity	
  

Total	
  Liabilities	
  and	
  Equity	
  

	
   857,389	
  	
  

	
   867,139	
  	
  

$	
  

	
   1,855,539	
  	
  

	
   $	
  

	
   1,748,097	
  	
  

The	
  Accompanying	
  Notes	
  Are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

38 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
  
hersha hospitality trust and subsidiaries 
consolidated statements of operations 
for the years ended december 31, 2014, 2013 and 2012 
[in thousands, except share/unit and per share amounts] 

Revenue:	
  

Hotel	
  Operating	
  Revenues	
  
Interest	
  Income	
  from	
  Development	
  Loans	
  
Other	
  Revenues	
   	
  

Total	
  Revenues	
  

Operating	
  Expenses:	
  

Hotel	
  Operating	
  Expenses	
  
Insurance	
  Recoveries	
  
Hotel	
  Ground	
  Rent	
  
Real	
  Estate	
  and	
  Personal	
  Property	
  Taxes	
  and	
  Property	
  Insurance	
  

General	
  and	
  Administrative	
  (including	
  Share	
  Based	
  Payments	
  of	
  $6,028,	
  $9,746,	
  
and	
  $9,678	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  2012,	
  respectively)	
   	
  
Acquisition	
  and	
  Terminated	
  Transaction	
  Costs	
  
Depreciation	
  and	
  Amortization	
  
Contingent	
  Consideration	
  Related	
  to	
  Acquisition	
  of	
  Hotel	
  Property	
  

Total	
  Operating	
  Expenses	
  

Operating	
  Income	
   	
  

Interest	
  Income	
  
Interest	
  Expense	
  
Other	
  Expense	
  
Gain	
  on	
  Disposition	
  of	
  Hotel	
  Properties	
  
Gain	
  on	
  Hotel	
  Acquisitions,	
  net	
  
Development	
  Loan	
  Recovery	
  
Loss	
  on	
  Debt	
  Extinguishment	
  

Year	
  Ended	
  December	
  31,	
   	
  

2014	
  

2013	
  

2012	
  

	
   $	
  

$	
  

	
   417,226	
  	
  	
  
	
   -‐	
  	
  
	
   180	
  	
  	
  
	
   417,406	
  	
  	
  

	
   $	
  

	
   338,064	
  	
  
	
   158	
  	
  
	
   191	
  	
  
	
   338,413	
  	
  

	
   299,005	
  	
  
	
   1,998	
  	
  
	
   212	
  	
  
	
   301,215	
  	
  

	
   227,324	
  	
  	
  
	
   (4,604)	
  	
  
	
   2,433	
  	
  	
  
	
   30,342	
  	
  	
  

	
   20,363	
  	
  	
  
	
   2,472	
  	
  	
  
	
   69,167	
  	
  	
  
	
   2,000	
  	
  	
  
	
   349,497	
  	
  	
  

	
   188,431	
  	
  
	
   (403)	
  
	
   985	
  	
  
	
   24,083	
  	
  

	
   23,869	
  	
  
	
   974	
  	
  
	
   55,784	
  	
  
	
   -‐	
  
	
   293,723	
  	
  

	
   161,982	
  	
  
	
   -‐	
  
	
   835	
  	
  
	
   19,341	
  	
  

	
   23,377	
  	
  
	
   1,179	
  	
  
	
   48,243	
  	
  
	
   -‐	
  
	
   254,957	
  	
  

	
   67,909	
  	
  	
  

	
   44,690	
  	
  

	
   46,258	
  	
  

	
   805	
  	
  	
  
	
   (43,357)	
  	
  
	
   (485)	
  	
  
	
   7,195	
  	
  	
  
	
   12,667	
  	
  	
  
	
   22,494	
  	
  	
  
	
   (670)	
  	
  

	
   1,784	
  	
  
	
   (40,935)	
  
	
   (102)	
  
	
   -‐	
  
	
   12,096	
  	
  
	
   -‐	
  
	
   (545)	
  

	
   1,311	
  	
  
	
   (38,070)	
  
	
   (43)	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   (3,189)	
  

Income	
  Before	
  Income	
  (Loss)	
  from	
  Unconsolidated	
  Joint	
  Venture	
  Investments,	
  
Income	
  Taxes	
  and	
  Discontinued	
  Operations	
  

	
   66,558	
  	
  	
  

	
   16,988	
  	
  

	
   6,267	
  	
  

Income	
  (Loss)	
  from	
  Unconsolidated	
  Joint	
  Ventures	
  
Impairment	
  of	
  Investment	
  in	
  Unconsolidated	
  Joint	
  Venture	
  
Loss	
  from	
  Remeasurement	
  of	
  Investment	
  in	
  Unconsolidated	
  Joint	
  Venture	
  

Income	
  (Loss)	
  from	
  Unconsolidated	
  Joint	
  Venture	
  Investments	
  

Income	
  Before	
  Income	
  Taxes	
  

Income	
  Tax	
  Benefit	
  

Income	
  from	
  Continuing	
  Operations	
  

Discontinued	
  Operations	
   	
   (Note	
  11):	
  

(Loss)	
  Gain	
  on	
  Disposition	
  of	
  Discontinued	
  Assets	
  
Impairment	
  of	
  Discontinued	
  Assets	
  
Income	
  from	
  Discontinued	
  Operations,	
  Net	
  of	
  Income	
  Taxes	
  

(Loss)	
  Income	
  from	
  Discontinued	
  Operations	
  

	
   693	
  	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   693	
  	
  	
  

	
   (22)	
  
	
   (1,813)	
  
	
   -‐	
  
	
   (1,835)	
  

	
   67,251	
  	
  	
  

	
   15,153	
  	
  

	
   2,685	
  	
  	
  

	
   5,600	
  	
  

	
   69,936	
  	
  	
  

	
   20,753	
  	
  

	
   (128)	
  	
  
	
   (1,800)	
  	
  
	
   263	
  	
  	
  
	
   (1,665)	
  	
  

	
   32,121	
  	
  
	
   (10,314)	
  
	
   7,388	
  	
  
	
   29,195	
  	
  

	
   (232)	
  
	
   -‐	
  
	
   (1,892)	
  
	
   (2,124)	
  

	
   4,143	
  	
  

	
   3,355	
  	
  

	
   7,498	
  	
  

	
   11,231	
  	
  
	
   -‐	
  
	
   3,489	
  	
  
	
   14,720	
  	
  

Net	
  Income	
  

	
   68,271	
  	
  	
  

	
   49,948	
  	
  

	
   22,218	
  	
  

(Income)	
  Loss	
  Allocated	
  to	
  Noncontrolling	
  Interests	
  
Preferred	
  Distributions	
  
Extinguishment	
  of	
  Issuance	
  Costs	
  Upon	
  Redemption	
  of	
  Series	
  A	
  Preferred	
  Shares	
   	
  

	
   (1,016)	
  	
  
	
   (14,356)	
  	
  
	
   -‐	
  	
  

	
   (335)	
  
	
   (14,611)	
  
	
   (2,250)	
  

	
   158	
  	
  
	
   (14,000)	
  
	
   -‐	
  

Net	
  Income	
  Applicable	
  to	
  Common	
  Shareholders	
  

	
   $	
  

	
   52,899	
  	
  	
  

$	
  

	
   32,752	
  	
  

	
   $	
  

	
   8,376	
  	
  

The	
  Accompanying	
  Notes	
  Are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

39 

 	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
consolidated statements of operations (continued) 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

Earnings	
  Per	
  Share:	
  

BASIC	
  

Income	
  (Loss)	
  from	
  Continuing	
  Operations	
  Applicable	
  to	
  Common	
  
Shareholders	
  
Income	
  (Loss)	
  from	
  Discontinued	
  Operations	
  Applicable	
  to	
  Common	
  
Shareholders	
  

Year	
  Ended	
  December	
  31,	
   	
  

2014	
  

2013	
  

2012	
  

	
   $	
  

	
   0.27	
  	
  	
  

$	
  

	
   0.02	
  	
  

	
   $	
  

	
   (0.03)	
  	
  

	
   (0.01)	
  	
  

	
   0.14	
  	
  

Net	
  Income	
  (Loss)	
  Applicable	
  to	
  Common	
  Shareholders	
  

	
   $	
  

	
   0.26	
  	
  	
  

$	
  

	
   0.16	
  	
  

	
   $	
  

DILUTED	
  

Income	
  (Loss)	
  from	
  Continuing	
  Operations	
  Applicable	
  to	
  Common	
  
Shareholders	
  

Income	
  (Loss)	
  from	
  Discontinued	
  Operations	
  Applicable	
  to	
  Common	
  
Shareholders	
  

	
   $	
  

	
   0.27	
  	
  	
  

$	
  

	
   0.02	
  	
  

	
   $	
  

	
   (0.03)	
   	
  

	
   (0.01)	
  	
  

	
   0.14	
  	
  

Net	
  Income	
  (Loss)	
  Applicable	
  to	
  Common	
  Shareholders	
  

	
   $	
  

	
   0.26	
  	
  	
  

$	
  

	
   0.16	
  	
  

	
   $	
  

	
   0.07	
  	
  	
  

	
   0.04	
  	
  	
  

	
   0.07	
  	
   	
  

	
   0.04	
  	
   	
  

Weighted	
  Average	
  Common	
  Shares	
  Outstanding:	
  

Basic	
   	
  

Diluted*	
  

	
   	
   199,109,209	
  	
  	
  

	
   	
   198,390,450	
  	
  

	
  	
   187,415,270	
  	
   	
  

	
   201,197,310	
  	
  

	
   	
   201,918,177	
  	
  

	
  	
   187,415,270	
  	
  

*	
  

Income	
  (loss)	
  allocated	
  to	
  noncontrolling	
  interest	
  in	
  Hersha	
  Hospitality	
  Limited	
  Partnership	
  (the	
  “Operating	
  
Partnership”	
  or	
  “HHLP”)	
  has	
  been	
  excluded	
  from	
  the	
  numerator	
  and	
  common	
  units	
  of	
  limited	
  partnership	
  
interest	
  (“Common	
  Units”)	
  in	
  the	
  Operating	
  Partnership	
  have	
  been	
  omitted	
  from	
  the	
  denominator	
  for	
  the	
  
purpose	
  of	
  computing	
  diluted	
  earnings	
  per	
  share	
  since	
  the	
  effect	
  of	
  including	
  these	
  shares	
  and	
  units	
  in	
  the	
  
numerator	
  and	
  denominator	
  would	
  have	
  no	
  impact.	
  	
  In	
  addition,	
  potentially	
  dilutive	
  common	
  shares,	
  if	
  any,	
  
have	
  been	
  excluded	
  from	
  the	
  denominator	
  if	
  they	
  are	
  anti-‐dilutive	
  to	
  income	
  (loss)	
  from	
  continuing	
  
operations	
  applicable	
  to	
  common	
  shareholders.	
  

The	
  following	
  table	
  summarizes	
  potentially	
  dilutive	
  securities	
  that	
  have	
  been	
  excluded	
  from	
  the	
  denominator	
  for	
  
the	
  purpose	
  of	
  computing	
  diluted	
  earnings	
  per	
  share:	
  

Common	
  Units	
  

LTIP	
  Units	
  

Unvested	
  Stock	
  Awards	
  Outstanding	
  

Contingently	
  Issuable	
  Share	
  Awards	
  

Options	
  to	
  Acquire	
  Common	
  Shares	
  Outstanding	
  

Total	
  Potentially	
  Dilutive	
  Securities	
  Excluded	
  from	
  the	
  Denominator	
  

Year	
  Ended	
  December	
  31,	
   	
  

2014	
  

2013	
  

2012	
  

	
   6,909,649	
  	
  

	
   32,711	
  	
  
	
   -‐	
   
	
   -‐	
   
	
   -‐	
   
	
   6,942,360	
  	
  

	
   6,968,035	
  	
  

	
   7,208,123	
  	
  

	
   -‐	
  

	
   -‐	
  

	
   -‐	
  

	
   -‐	
  

	
   -‐	
  

	
   433,097	
  	
  

	
   2,778,545	
  	
  

	
   275,580	
  	
  

	
   6,968,035	
  	
  

10,695,345	
  

The	
  Accompanying	
  Notes	
  Are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

40 

	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  	
   	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
  
hersha hospitality trust and subsidiaries 
consolidated statements of comprehensive income (loss) 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands] 

Net	
  Income	
  

Other	
  Comprehensive	
  Income	
  (Loss)	
   	
  

Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  Instruments	
  

Less:	
  Reclassification	
  Adjustment	
  for	
  Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  Included	
  in	
  Net	
  Income	
  

Year	
  Ended	
  December	
  31,	
   	
  

2014	
  

2013	
  

2012	
  

	
   $	
  

	
   68,271	
  	
  

	
  $	
  

	
   49,948	
  	
  	
   $	
  

	
   22,218	
  	
  

	
   1,527	
  	
  

	
   2,694	
  	
  	
   	
  

	
   1,073	
  	
  

	
   (1,509)	
  

	
   (1,284)	
  	
   	
  

	
   (1,708)	
  

Comprehensive	
  Income	
  

Less:	
   	
   Comprehensive	
  Loss	
  (Income)	
  Attributable	
  to	
  Noncontrolling	
  Interests	
  

Less:	
   	
   Preferred	
  Distributions	
  
Less:	
   	
   Extinguishment	
  of	
  Issuance	
  Costs	
  Upon	
  Redemption	
  of	
  Series	
  A	
  
Preferred	
  Shares	
  
Comprehensive	
  Income	
  Attributable	
  to	
  Common	
  Shareholders	
  

	
   68,289	
  	
  

	
   (1,016)	
  

	
   (14,356)	
  

	
   -‐	
  

	
   $	
  

	
   52,917	
  	
  

	
  $	
  

	
   51,358	
  	
  	
   	
  
	
   (335)	
  	
   	
  
	
   (14,611)	
  	
   	
  

	
   (2,250)	
  	
   	
  
	
   34,162	
  	
  	
   $	
  

	
   21,583	
  	
  

	
   158	
  	
  

	
   (14,000)	
  

	
   -‐	
  

	
   7,741	
  	
  

The	
  Accompanying	
  Notes	
  are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

41 

 
 
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
   	
  	
  
	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
  
hersha hospitality trust and subsidiaries 
consolidated statements of equity 
for the years ended december 31, 2014, 2013 and 2012 
[in thousands, except shares and per share amounts] 

Shareholders'	
  Equity	
  

Class	
  B	
  
Common	
  
Shares	
  
($)	
  

Preferred	
  
Shares	
  
($)	
  

Additional	
  
Paid-‐In	
  Capital	
  
($)	
  

Accumulated	
  
Other	
  
Comprehensive	
  
Loss	
  ($)	
  

Distributions	
  
in	
  Excess	
  of	
  
Net	
  Earnings	
  
($)	
  

Total	
  
Shareholders'	
  
Equity	
  ($)	
  

	
   70	
  	
   	
   1,041,027.00	
  	
  
	
   571	
  	
  
	
   (966)	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (1,151)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (310,972)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   730,673	
  	
  
	
   572	
  	
  
	
   (966)	
  	
  

Preferred	
  
Shares	
  
	
   7,000,000	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

Balance	
  at	
  December	
  31,	
  2011	
  
Unit	
  Conversion	
   	
  
Reallocation	
  of	
  Noncontrolling	
  Interest	
  
Common	
  Stock	
  Issuance	
  

Common	
  Stock	
  Offering,	
  Net	
  of	
  Costs	
  
Common	
  Stock	
  Option	
  Cancellation	
  
Dividends	
  and	
  Distributions	
  declared:	
  
Common	
  Stock	
  ($0.24	
  per	
  share)	
  
Preferred	
  Stock	
   	
  
Common	
  Units	
  ($0.24	
  per	
  share)	
  

Dividend	
  Reinvestment	
  Plan	
   	
  
Stock	
  Based	
  Compensation	
  

Grants	
  
Amortization	
  

Consolidation	
  of	
  Variable	
  Interest	
  Entity	
  
Deconsolidation	
  of	
  Consolidated	
  Joint	
  
Ventures	
  
Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  
Net	
  Income	
  (Loss)	
  
Balance	
  at	
  December	
  31,	
  2012	
  
Unit	
  Conversion/Redemption	
  
Reallocation	
  of	
  Noncontrolling	
  Interest	
  
Preferred	
  Shares	
  

Preferred	
  Share	
  Offering,	
  Net	
  of	
  Costs	
  
Preferred	
  Share	
  Redemption	
  

Dividends	
  and	
  Distributions	
  declared:	
  
Common	
  Shares	
  ($0.24	
  per	
  share)	
  
Preferred	
  Shares	
  
Common	
  Units	
  ($0.24	
  per	
  share)	
  

Dividend	
  Reinvestment	
  Plan	
   	
  
Share	
  Based	
  Compensation:	
  

Grants	
  
Amortization	
  

Consolidation	
  of	
  Variable	
  Interest	
  Entity	
  
Deconsolidation	
  of	
  Consolidated	
  Joint	
  
Ventures	
  
Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  
Net	
  Income	
  
Balance	
  at	
  December	
  31,	
  2013	
  
Unit	
  Conversion/Redemption	
  
Restricted	
  Shares	
  Forfeiture/LTIP	
  Unit	
  
Issuance	
  
Repurchase	
  of	
  Common	
  Shares	
  
Reclassification	
  of	
  Noncontrolling	
  Interest	
  
Preferred	
  Stock	
  

Preferred	
  Stock	
  Offering,	
  Net	
  of	
  Costs	
  
Preferred	
  Stock	
  Redemption	
  

Dividends	
  and	
  Distributions	
  declared:	
  
Common	
  Shares	
  ($0.26	
  per	
  share)	
  
Preferred	
  Shares	
  
Common	
  Units	
  ($0.26	
  per	
  share)	
  
LTIP	
  Units	
  ($0.07	
  per	
  share)	
  
Dividend	
  Reinvestment	
  Plan	
   	
  
Share	
  Based	
  Compensation:	
  

Grants	
  
Amortization	
  

Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  
Net	
  Income	
  
Balance	
  at	
  December	
  31,	
  2014	
  

Common	
  
Shares	
  
	
   169,969,973	
  	
  
	
   157,810	
  	
  
	
   -‐	
  	
  

Class	
  A	
  
Common	
  
Shares	
  ($)	
  	
  
	
   1,699	
  	
  
	
   1	
  	
  
	
   -‐	
  	
  

	
   24,000,000	
  	
  
	
   2,521,561	
  	
  

	
   240	
  	
  
	
   25	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   5,117	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  	
  
	
   -‐	
  	
  

	
   2,017,895	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   198,672,356	
  	
  
	
   27,790	
  	
  
	
   -‐	
  	
  

	
   21	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,986	
  	
  
	
   1	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   7,206	
  	
  

	
   4,052,067	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  	
  
	
   -‐	
  	
  

	
   41	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   202,759,419	
  	
  
	
   18,900	
  	
  

	
   (1,948,324)	
  	
  
	
   (2,626,854)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   2,028	
  	
  
	
   -‐	
  	
  

	
   (19)	
  	
  
	
   (26)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   8,647	
  	
  

	
   641,295	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   6	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   198,853,083	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,989	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   7,000,000	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   70	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   128,318	
  	
  
	
   (25)	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   24	
  	
  

	
   2,616	
  	
  
	
   6,727	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,178,292	
  	
  
	
   (234)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   3,000,000	
  	
  
	
   -‐	
  	
  	
   (2,400,000)	
  	
  

	
   30	
  	
  
	
   (24)	
  	
  

	
   72,340	
  	
  
	
   (59,976)	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   38	
  	
  

	
   467	
  	
  
	
   9,871	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (635)	
  	
  
	
   -‐	
  	
  
	
   (1,786)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   7,600,000	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   76	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,200,798	
  	
  
	
   (77)	
  	
  

	
   1,410	
  	
  
	
   -‐	
  	
  
	
   (376)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   49,613	
  	
  
	
   (364,568)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   19	
  	
  
	
   (13,771)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   50	
  	
  

	
   641	
  	
  
	
   5,396	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   7,600,000	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   76	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,193,056	
  	
  

	
   18	
  	
  
	
   -‐	
  	
  
	
   (358)	
  	
  

	
   -‐	
  	
  
	
   67,255	
  	
  
	
   (365,381)	
  	
  

	
   18	
  	
  
	
   67,255	
  	
  
	
   829,382	
  	
  
-‐	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   128,558	
  	
  
	
   -‐	
  	
  

	
   (46,138)	
  	
  
	
   (14,000)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   22,376	
  	
  
	
   (348,734)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (46,138)	
  	
  
	
   (14,000)	
  	
  
	
   -‐	
  	
  
	
   24	
  	
  

	
   2,637	
  	
  
	
   6,727	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (635)	
  	
  
	
   22,376	
  	
  
	
   829,828	
  	
  
	
   (233)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  

	
   72,370	
  	
  
	
   (60,000)	
  	
  

	
   (50,836)	
  	
  
	
   (14,611)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (50,836)	
  	
  
	
   (14,611)	
  	
  
	
   -‐	
  	
  
	
   38	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   508	
  	
  
	
   9,871	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   1,410	
  	
  
	
   49,613	
  	
  
	
   837,958	
  	
  
	
   (77)	
  	
  

	
   -‐	
  	
  
	
   (15,418)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   (1,621)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (52,091)	
  	
  
	
   (14,356)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (52,091)	
  	
  
	
   (14,356)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   50	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   647	
  	
  
	
   5,396	
  	
  

The	
  Accompanying	
  Notes	
  are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

42 

 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
Noncontrolling	
  Interests	
  

Total	
  
Shareholders'	
  
Equity	
  ($)	
  

	
   Shares	
  

	
   730,673	
  	
  
	
   572	
  	
  
	
   (966)	
  	
  

4,206,064	
  
	
   -‐	
  	
  
(157,810)	
  

Common	
  
Units	
  ($)	
   	
  
	
   16,862	
  	
  
	
   (572)	
  	
  
	
   -‐	
  	
  

Consolidated	
  
Joint	
  
Ventures	
  ($)	
  	
  
	
   307	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

Consolidated	
  
Variable	
  
Interest	
  Entity	
  
($)	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

Total	
  
Noncontrolling	
  
Interests	
  ($)	
   	
  
	
   17,169	
  	
  
	
   (572)	
  	
  
	
   -‐	
  	
  

	
   Shares	
  

Total	
  Equity	
  
($)	
  
	
   747,842	
  	
   	
   3,064,252	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   (966)	
  	
  

Redeemable	
  
Noncontrolling	
  
Interests	
  

hospitality trust and subsidiaries 
consolidated statements of equity (continued) 
for the years ended december 31, 2014, 2013 and 2012 
[in thousands, except shares and per share amounts]   

Balance	
  at	
  December	
  31,	
  2011	
  
Unit	
  Conversion	
   	
  
Reallocation	
  of	
  Noncontrolling	
  Interest	
  
Common	
  Stock	
  Issuance	
  

Common	
  Stock	
  Offering,	
  Net	
  of	
  Costs	
  
Common	
  Stock	
  Option	
  Cancellation	
  
Dividends	
  and	
  Distributions	
  declared:	
  
Common	
  Stock	
  ($0.24	
  per	
  share)	
  
Preferred	
  Stock	
   	
  
Common	
  Units	
  ($0.24	
  per	
  share)	
  

Dividend	
  Reinvestment	
  Plan	
   	
  
Stock	
  Based	
  Compensation	
  

Grants	
  
Amortization	
  

Consolidation	
  of	
  Variable	
  Interest	
  Entity	
  
Deconsolidation	
  of	
  Consolidated	
  Joint	
  
Ventures	
  
Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  
Net	
  Income	
  (Loss)	
  
Balance	
  at	
  December	
  31,	
  2012	
  
Unit	
  Conversion/Redemption	
  
Reallocation	
  of	
  Noncontrolling	
  Interest	
  
Preferred	
  Shares	
  

Preferred	
  Share	
  Offering,	
  Net	
  of	
  Costs	
  
Preferred	
  Share	
  Redemption	
  

Dividends	
  and	
  Distributions	
  declared:	
  
Common	
  Shares	
  ($0.24	
  per	
  share)	
  
Preferred	
  Shares	
  
Common	
  Units	
  ($0.24	
  per	
  share)	
  

Dividend	
  Reinvestment	
  Plan	
   	
  
Share	
  Based	
  Compensation:	
  

Grants	
  
Amortization	
  

Consolidation	
  of	
  Variable	
  Interest	
  Entity	
  
Deconsolidation	
  of	
  Consolidated	
  Joint	
  
Ventures	
  
Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  
Net	
  Income	
  
Balance	
  at	
  December	
  31,	
  2013	
  
Unit	
  Conversion/Redemption	
  
Restricted	
  Shares	
  Forfeiture/LTIP	
  Unit	
  
Issuance	
  
Repurchase	
  of	
  Common	
  Shares	
  
Reclassification	
  of	
  Noncontrolling	
  Interest	
  
Preferred	
  Stock	
  

Preferred	
  Stock	
  Offering,	
  Net	
  of	
  Costs	
  
Preferred	
  Stock	
  Redemption	
  

Dividends	
  and	
  Distributions	
  declared:	
  
Common	
  Shares	
  ($0.26	
  per	
  share)	
  
Preferred	
  Shares	
  
Common	
  Units	
  ($0.26	
  per	
  share)	
  
LTIP	
  Units	
  ($0.07	
  per	
  share)	
  
Dividend	
  Reinvestment	
  Plan	
   	
  
Share	
  Based	
  Compensation:	
  

Grants	
  
Amortization	
  

Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  
Instruments	
  
Net	
  Income	
  
Balance	
  at	
  December	
  31,	
  2014	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   128,558	
  	
  
	
   -‐	
  	
  

	
   (46,138)	
  	
  
	
   (14,000)	
  	
  
	
   -‐	
  	
  
	
   24	
  	
  

	
   2,637	
  	
  
	
   6,727	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (635)	
  	
  
	
   22,376	
  	
  
	
   829,828	
  	
  
	
   (233)	
  	
  
	
   -‐	
  	
  

	
   72,370	
  	
  
	
   (60,000)	
  	
  

4,048,254	
  
(197,790)	
  
3,064,252	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (50,836)	
  	
  
	
   (14,611)	
  	
  
	
   -‐	
  	
  
	
   38	
  	
  

	
   508	
  	
  
	
   9,871	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,410	
  	
  
	
   49,613	
  	
  
	
   837,958	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

6,914,716	
  
	
   (77)	
  	
  	
   (65,304)	
  	
  

	
   -‐	
  	
  
	
   (15,418)	
  	
  
	
   -‐	
  	
  

1,948,324	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (52,091)	
  	
  
	
   (14,356)	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   50	
  	
  

	
   647	
  	
  
	
   5,396	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (991)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   185	
  	
  
	
   15,484	
  	
  
	
   (766)	
  	
  
	
   15,365	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (1,669)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,109	
  	
  
	
   29,523	
  	
  
	
   (261)	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  	
  

	
   -‐	
  	
  	
  
	
   -‐	
  	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (1,793)	
  	
  
	
   (136)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   18	
  	
  
	
   67,255	
  	
  
	
   829,382	
  	
  
8,797,736	
  
-‐	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   1,749	
  	
  
	
   29,082	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (307)	
  	
  

	
   -‐	
  	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   956	
  
	
   -‐	
  

	
   (480)	
  
	
   476	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   (818)	
  
	
   (342)	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   128,558	
  	
  
	
   -‐	
  	
  

	
   (46,138)	
  	
  
	
   (14,000)	
  	
  
	
   (991)	
  	
  
	
   24	
  	
  

	
   2,637	
  	
  
	
   6,727	
  	
  
	
   956	
  	
  
	
   (307)	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (991)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   956	
  	
  
	
   (307)	
  	
  

	
   -‐	
  	
  
	
   (295)	
  	
  
	
   15,960	
  	
  
	
   (766)	
  	
  
	
   15,365	
  	
  

	
   (635)	
  	
  
	
   22,081	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   845,788	
  	
   	
   3,064,252	
  	
  
	
   -‐	
  	
  

	
   (999)	
  	
  
	
   15,365	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   72,370	
  	
  
	
   (60,000)	
  	
  

(3,064,252)	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (1,669)	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   291	
  	
  
	
   29,181	
  	
  
	
   (261)	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   (50,836)	
  	
  
	
   (14,611)	
  	
  
	
   (1,669)	
  	
  
	
   38	
  	
  

	
   508	
  	
  
	
   9,871	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   1,410	
  	
  
	
   49,904	
  	
  
	
   867,139	
  	
  
	
   (338)	
  	
  

	
   -‐	
  	
  
	
   (15,418)	
  	
  
	
   -‐	
  	
  	
  

	
   -‐	
  	
  	
  
	
   -‐	
  	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   (1,793)	
  	
  
	
   (136)	
  	
  
	
   -‐	
  	
  

	
   (52,091)	
  	
  
	
   (14,356)	
  	
  
	
   (1,793)	
  	
  
	
   (136)	
  	
  
	
   50	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   647	
  	
  
	
   5,396	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  

Common	
  
Units	
  ($)	
  

	
   14,955	
  
	
   -‐	
  
	
   966	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   (736)	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   136	
  
	
   15,321	
  
	
   -‐	
  
	
   (15,365)	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   44	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  

43 

The	
  Accompanying	
  Notes	
  are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

	
   -‐	
  
	
   (733)	
  
	
   (1,075)	
  

	
   -‐	
  	
  
	
   1,016	
  	
  
	
   28,007	
  	
  

	
   18	
  	
  
	
   68,271	
  	
  
	
   857,389	
  	
  

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  	
  	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
consolidated statements of cash flows   
for the years ended december 31, 2014, 2013 and 2012 
[in thousands] 

Operating	
  Activities:	
  

Net	
  Income	
  

Adjustments	
  to	
  Reconcile	
  Net	
  Income	
  to	
  Net	
  Cash	
  Provided	
  by	
  Operating	
  
Activities:	
  

Gain	
  on	
  Hotel	
  Acquisitions,	
  Net	
  
Contingent	
  Consideration	
  
Development	
  Loan	
  Recovery	
  
Gain	
  on	
  Disposition	
  of	
  Hotel	
  Properties	
  
Impairment	
  of	
  Hotel	
  Assets	
  
Deferred	
  Taxes	
  
Depreciation	
  
Amortization	
  
Loss	
  on	
  Debt	
  Extinguishment	
  
Development	
  Loan	
  Interest	
  Added	
  to	
  Principal	
  
Equity	
  in	
  Loss	
  of	
  Unconsolidated	
  Joint	
  Ventures	
  
Distributions	
  from	
  Unconsolidated	
  Joint	
  Ventures	
  
Loss	
  Recognized	
  on	
  Change	
  in	
  Fair	
  Value	
  of	
  Derivative	
  Instrument	
  
Share	
  Based	
  Compensation	
  Expense	
  

Change	
  in	
  Assets	
  and	
  Liabilities:	
  

(Increase)	
  Decrease	
  in:	
  

Hotel	
  Accounts	
  Receivable	
   	
  
Escrows	
  
Other	
  Assets	
  
Due	
  from	
  Related	
  Parties	
  

Increase	
  (Decrease)	
  in:	
  

	
   $	
  

	
   $	
  

Due	
  to	
  Related	
  Parties	
  
Accounts	
  Payable,	
  Accrued	
  Expenses	
  and	
  Other	
  Liabilities	
  

Net	
  Cash	
  Provided	
  by	
  Operating	
  Activities	
  

Investing	
  Activities:	
  

Purchase	
  of	
  Hotel	
  Property	
  Assets	
  
Deposits	
  on	
  Hotel	
  Acquisitions,	
  Net	
  
Capital	
  Expenditures	
  
Cash	
  Paid	
  for	
  Hotel	
  Development	
  Projects	
  
Proceeds	
  from	
  Disposition	
  of	
  Hotel	
  Properties	
   	
  
Net	
  Changes	
  in	
  Capital	
  Expenditure	
  Escrows	
   	
  
Investment	
  in	
  Notes	
  Receivable	
  
Repayment	
  of	
  Notes	
  Receivable	
  
Proceeds	
  from	
  Insurance	
  Claims	
  
Repayment	
  of	
  Development	
  Loans	
  Receivable	
  
Distributions	
  from	
  Unconsolidated	
  Joint	
  Venture	
  
Advances	
  and	
  Capital	
  Contributions	
  to	
  Unconsolidated	
  Joint	
  Ventures	
  

Net	
  Cash	
  Used	
  in	
  Investing	
  Activities	
  

	
   $	
  

2014	
  

2013	
  

2012	
  

	
   $	
  

	
   68,271	
  	
  

	
   $	
  

	
   49,948	
  	
  

	
   $	
  

	
   22,218	
  	
  

	
   (12,667)	
  
	
   2,000	
  	
  
	
   (22,494)	
  
	
   (7,067)	
  
	
   1,800	
  	
  
	
   (2,685)	
  
	
   68,753	
  	
  
	
   1,979	
  	
  
	
   673	
  	
  
	
   -‐	
  
	
   (693)	
  
	
   1,262	
  	
  
	
   71	
  	
  
	
   6,028	
  	
  

	
   (350)	
  
	
   1,272	
  	
  
	
   2,182	
  	
  
	
   4,544	
  	
  

	
   2,388	
  	
  
	
   (2,373)	
  
	
   112,894	
  	
  

	
   (175,236)	
  
	
   -‐	
  
	
   (38,342)	
  
	
   (3,764)	
  
	
   30,056	
  	
  
	
   4,577	
  	
  
	
   -‐	
  
	
   -‐	
  
	
   1,881	
  	
  
	
   -‐	
  
	
   324	
  	
  
	
   -‐	
  
	
   (180,504)	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   (12,096)	
  
	
   -‐	
  
	
   -‐	
  
	
   (32,121)	
  
	
   10,314	
  	
  
	
   (5,500)	
  
	
   61,801	
  	
  
	
   2,545	
  	
  
	
   471	
  	
  
	
   -‐	
  
	
   1,835	
  	
  
	
   568	
  	
  
	
   22	
  	
  
	
   9,746	
  	
  

	
   2,419	
  	
  
	
   476	
  	
  
	
   (4,269)	
  
	
   (2,636)	
  

	
   412	
  	
  
	
   6,326	
  	
  
	
   90,261	
  	
  

	
   (217,142)	
  
	
   (1,836)	
  
	
   (42,854)	
  
	
   (20,054)	
  
	
   136,015	
  	
  
	
   (1,287)	
  
	
   -‐	
  
	
   -‐	
  
	
   5,001	
  	
  
	
   15,122	
  	
  
	
   1,711	
  	
  
	
   (150)	
  
	
   (125,474)	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   (11,231)	
  
	
   -‐	
  
	
   (3,355)	
  
	
   56,071	
  	
  
	
   3,680	
  	
  
	
   2,261	
  	
  
	
   (678)	
  
	
   2,124	
  	
  
	
   1,387	
  	
  
	
   658	
  	
  
	
   9,678	
  	
  

	
   (235)	
  
	
   (1,944)	
  
	
   (2,683)	
  
	
   (5,500)	
  

	
   1,541	
  	
  
	
   (2,236)	
  
	
   71,756	
  	
  

	
   (67,637)	
  
	
   (18,750)	
  
	
   (28,443)	
  
	
   (10,171)	
  
	
   63,722	
  	
  
	
   (4,454)	
  
	
   (150)	
  
	
   1,720	
  	
  
	
   -‐	
  
	
   8,000	
  	
  
	
   476	
  	
  
	
   (130)	
  
	
   (55,817)	
  

The	
  Accompanying	
  Notes	
  are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

44 

	
  
	
  
   
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
consolidated statements of cash flows (continued) 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands] 

Financing	
  Activities:	
  

Proceeds	
  from	
  (Repayments	
  of)	
  Borrowings	
  Under	
  Line	
  of	
  Credit,	
  Net	
  
Proceeds	
  from	
  Unsecured	
  Term	
  Loan	
  Borrowing	
  
Principal	
  Repayment	
  of	
  Mortgages	
  and	
  Notes	
  Payable	
  
Proceeds	
  from	
  Mortgages	
  and	
  Notes	
  Payable	
  
Cash	
  Paid	
  for	
  Deferred	
  Financing	
  Costs	
  
Proceeds	
  from	
  Issuance	
  of	
  Preferred	
  Shares,	
  Net	
  
Proceeds	
  from	
  Issuance	
  of	
  Common	
  Shares,	
  Net	
  
Redemption	
  of	
  Series	
  A	
  Preferred	
  Shares	
  
Repurchase	
  of	
  Common	
  Shares	
  
Redemption	
  of	
  Common	
  Partnership	
  Units	
  
Settlement	
  of	
  Interest	
  Rate	
  Cap	
  
Dividends	
  Paid	
  on	
  Common	
  Shares	
  
Dividends	
  Paid	
  on	
  Preferred	
  Shares	
  
Distributions	
  Paid	
  on	
  Common	
  Partnership	
  Units	
  

Net	
  Cash	
  Provided	
  by	
  Financing	
  Activities	
  

Net	
  Increase	
  (Decrease)	
  in	
  Cash	
  and	
  Cash	
  Equivalents	
   	
  
Cash	
  and	
  Cash	
  Equivalents	
  -‐	
  Beginning	
  of	
  Period	
  

2014	
  

2013	
  

2012	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   -‐	
  
	
   100,000	
  	
  
	
   (61,348)	
  
	
   101,000	
  	
  
	
   (4,450)	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   (15,418)	
  
	
   (338)	
  
	
   (8)	
  
	
   (50,286)	
  
	
   (14,356)	
  
	
   (1,724)	
  
	
   53,072	
  	
  

	
   (14,538)	
  
	
   36,213	
  	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   -‐	
  
	
   50,000	
  	
  
	
   (54,398)	
  
	
   65,000	
  	
  
	
   (2,283)	
  
	
   72,370	
  	
  
	
   -‐	
  
	
   (60,000)	
  
	
   -‐	
  
	
   (1,000)	
  
	
   (565)	
  
	
   (50,553)	
  
	
   (14,522)	
  
	
   (1,682)	
  
	
   2,367	
  	
  

	
   (32,846)	
  
	
   69,059	
  	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   (51,000)	
  
	
   100,000	
  	
  
	
   (187,478)	
  
	
   98,695	
  	
  
	
   (96)	
  
	
   -‐	
  
	
   128,558	
  	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   (44,391)	
  
	
   (14,000)	
  
	
   (1,736)	
  
	
   28,552	
  	
  

	
   44,491	
  	
  
	
   24,568	
  	
  

Cash	
  and	
  Cash	
  Equivalents	
  -‐	
  End	
  of	
  Period	
  

	
   $	
  

	
   21,675	
  	
  

	
   $	
  

	
   36,213	
  	
  

	
   $	
  

	
   69,059	
  	
  

The	
  Accompanying	
  Notes	
  are	
  an	
  Integral	
  Part	
  of	
  These	
  Consolidated	
  Financial	
  Statements.	
  

45 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  

Hersha	
  Hospitality	
  Trust	
  (“we”	
  or	
  the	
  “Company”)	
  was	
  formed	
  in	
  May	
  1998	
  as	
  a	
  self-‐administered,	
  Maryland	
  real	
  
estate	
  investment	
  trust.	
  We	
  have	
  elected	
  to	
  be	
  taxed	
  and	
  expect	
  to	
  continue	
  to	
  elect	
  to	
  be	
  taxed	
  as	
  a	
  real	
  estate	
  
investment	
  trust,	
  or	
  REIT,	
  for	
  federal	
  income	
  tax	
  purposes.	
  

The	
  Company	
  owns	
  a	
  controlling	
  general	
  partnership	
  interest	
  in	
  Hersha	
  Hospitality	
  Limited	
  Partnership	
  (“HHLP”	
  or	
  
the	
  “Partnership”),	
  which	
  owns	
  a	
  99%	
  limited	
  partnership	
  interest	
  in	
  various	
  subsidiary	
  partnerships.	
  Hersha	
  
Hospitality,	
  LLC	
  (“HHLLC”),	
  a	
  Virginia	
  limited	
  liability	
  company,	
  owns	
  a	
  1%	
  general	
  partnership	
  interest	
  in	
  the	
  
subsidiary	
  partnerships	
  and	
  the	
  Partnership	
  is	
  the	
  sole	
  member	
  of	
  HHLLC.	
  

The	
  Partnership	
  owns	
  a	
  taxable	
  REIT	
  subsidiary	
  (“TRS”),	
  44	
  New	
  England	
  Management	
  Company	
  (“44	
  New	
  
England”	
  or	
  “TRS	
  Lessee”),	
  which	
  leases	
  certain	
  of	
  the	
  Company’s	
  hotels.	
  

Hersha’s	
  common	
  shares	
  of	
  beneficial	
  interest	
  trade	
  on	
  the	
  New	
  York	
  Stock	
  Exchange	
  (“the	
  NYSE”)	
  under	
  the	
  ticker	
  
symbol	
  "HT",	
  its	
  8.0%	
  Series	
  B	
  preferred	
  shares	
  of	
  beneficial	
  interest	
  trade	
  on	
  the	
  NYSE	
  under	
  the	
  ticker	
  symbol	
  “HT	
  
PR	
  B”	
  and	
  its	
  6.875%	
  Series	
  C	
  preferred	
  shares	
  of	
  beneficial	
  interest	
  trade	
  on	
  the	
  NYSE	
  under	
  the	
  ticker	
  symbol	
  “HT	
  
PR	
  C.”	
  

As	
  of	
  December	
  31,	
  2014,	
  the	
  Company,	
  through	
  the	
  Partnership	
  and	
  subsidiary	
  partnerships,	
  wholly	
  owned	
  46	
  
limited	
  and	
  full	
  service	
  hotels.	
  All	
  of	
  the	
  wholly	
  owned	
  hotel	
  facilities	
  are	
  leased	
  to	
  the	
  Company’s	
  TRS,	
  44	
  New	
  
England.	
   	
  

In	
  addition	
  to	
  the	
  wholly	
  owned	
  hotel	
  properties,	
  as	
  of	
  December	
  31,	
  2014,	
  the	
  Company	
  owned	
  joint	
  venture	
  
interests	
  in	
  another	
  five	
  properties.	
  The	
  properties	
  owned	
  by	
  the	
  joint	
  ventures	
  are	
  leased	
  to	
  a	
  TRS	
  owned	
  by	
  the	
  
joint	
  venture	
  or	
  to	
  an	
  entity	
  owned	
  by	
  the	
  joint	
  venture	
  partners	
  and	
  44	
  New	
  England.	
  The	
  following	
  table	
  lists	
  the	
  
properties	
  owned	
  by	
  these	
  joint	
  ventures:	
  

Joint	
  Venture	
  

	
   Ownership	
   	
  

Property	
  

Location	
  

Lessee/Sublessee	
  

Unconsolidated	
  Joint	
  Ventures	
  	
  
Mystic	
  Partners,	
  LLC	
  

66.7%	
  

	
   Marriott	
  

	
   Mystic,	
  CT	
  

	
   Mystic	
  Partners	
  Leaseco,	
  

8.8%	
  

	
   Hilton	
  

	
   Hartford,	
  CT	
  

	
   Mystic	
  Partners	
  Leaseco,	
  

LLC	
  

15.0%	
  

	
   Marriott	
  

	
   Hartford,	
  CT	
  

LLC	
  

	
   Mystic	
  Partners	
  Leaseco,	
  

LLC	
  

SB	
  Partners,	
  LLC	
  
Hiren	
  Boston,	
  LLC	
  

50.0%	
  
50.0%	
  

	
   Holiday	
  Inn	
  
Express	
  
	
   Courtyard	
  

	
   South	
  Boston,	
  MA	
   	
   South	
  Bay	
  Sandeep,	
  LLC	
  
	
   South	
  Boston,	
  MA	
   	
   South	
  Bay	
  Boston,	
  LLC	
  

Mystic	
  Partners,	
  LLC	
  owns	
  an	
  interest	
  in	
  three	
  hotel	
  properties.	
  Our	
  interest	
  in	
  Mystic	
  Partners,	
  LLC	
  is	
  relative	
  to	
  
our	
  interest	
  in	
  each	
  of	
  the	
  three	
  properties	
  owned	
  by	
  the	
  joint	
  venture	
  as	
  defined	
  in	
  the	
  joint	
  venture’s	
  governing	
  
documents.	
  Each	
  of	
  the	
  three	
  properties	
  owned	
  by	
  Mystic	
  Partners,	
  LLC	
  is	
  leased	
  to	
  a	
  separate	
  entity	
  that	
  is	
  
consolidated	
  in	
  Mystic	
  Partners	
  Leaseco,	
  LLC	
  which	
  is	
  owned	
  by	
  44	
  New	
  England	
  and	
  our	
  joint	
  venture	
  partner	
  in	
  
Mystic	
  Partners,	
  LLC.	
  

The	
  properties	
  are	
  managed	
  by	
  eligible	
  independent	
  management	
  companies,	
  including	
  Hersha	
  Hospitality	
  
Management,	
  LP	
  (“HHMLP”).	
  HHMLP	
  is	
  owned	
  in	
  part	
  by	
  certain	
  of	
  our	
  trustees	
  and	
  executive	
  officers	
  and	
  other	
  
unaffiliated	
  third	
  party	
  investors.	
  

Principles	
  of	
  Consolidation	
  and	
  Presentation	
  

The	
  accompanying	
  consolidated	
  financial	
  statements	
  have	
  been	
  prepared	
  in	
  accordance	
  with	
  U.S.	
  generally	
  
accepted	
  accounting	
  principles	
  and	
  include	
  all	
  of	
  our	
  accounts	
  as	
  well	
  as	
  accounts	
  of	
  the	
  Partnership,	
  subsidiary	
  
partnerships	
  and	
  our	
  wholly	
  owned	
  TRS	
  Lessee.	
  All	
  significant	
  inter-‐company	
  amounts	
  have	
  been	
  eliminated.	
  

46 

	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

Consolidated	
  properties	
  are	
  either	
  wholly	
  owned	
  or	
  owned	
  less	
  than	
  100%	
  by	
  the	
  Partnership	
  and	
  are	
  controlled	
  by	
  
the	
  Company	
  as	
  general	
  partner	
  of	
  the	
  Partnership.	
  Properties	
  owned	
  in	
  joint	
  ventures	
  are	
  also	
  consolidated	
  if	
  the	
  
determination	
  is	
  made	
  that	
  we	
  are	
  the	
  primary	
  beneficiary	
  in	
  a	
  variable	
  interest	
  entity	
  (VIE)	
  or	
  we	
  maintain	
  control	
  
of	
  the	
  asset	
  through	
  our	
  voting	
  interest	
  in	
  the	
  entity.	
  

Control	
  can	
  be	
  demonstrated	
  when	
  the	
  general	
  partner	
  has	
  the	
  power	
  to	
  impact	
  the	
  economic	
  performance	
  of	
  the	
  
partnership,	
  which	
  includes	
  the	
  ability	
  of	
  the	
  general	
  partner	
  to	
  manage	
  day-‐to-‐day	
  operations,	
  refinance	
  debt	
  and	
  
sell	
  the	
  assets	
  of	
  the	
  partnerships	
  without	
  the	
  consent	
  of	
  the	
  limited	
  partners	
  and	
  the	
  inability	
  of	
  the	
  limited	
  
partners	
  to	
  replace	
  the	
  general	
  partner.	
  Control	
  can	
  be	
  demonstrated	
  by	
  the	
  limited	
  partners	
  if	
  the	
  limited	
  partners	
  
have	
  the	
  right	
  to	
  dissolve	
  or	
  liquidate	
  the	
  partnership	
  or	
  otherwise	
  remove	
  the	
  general	
  partner	
  without	
  cause	
  or	
  
have	
  rights	
  to	
  participate	
  in	
  the	
  significant	
  decisions	
  made	
  in	
  the	
  ordinary	
  course	
  of	
  the	
  partnership’s	
  business.	
  

We	
  evaluate	
  each	
  of	
  our	
  investments	
  and	
  contractual	
  relationships	
  to	
  determine	
  whether	
  they	
  meet	
  the	
  guidelines	
  
of	
  consolidation.	
  Entities	
  are	
  consolidated	
  if	
  the	
  determination	
  is	
  made	
  that	
  we	
  are	
  the	
  primary	
  beneficiary	
  in	
  a	
  VIE	
  
or	
  we	
  maintain	
  control	
  of	
  the	
  asset	
  through	
  our	
  voting	
  interest	
  or	
  other	
  rights	
  in	
  the	
  operation	
  of	
  the	
  entity.	
  To	
  
determine	
  if	
  we	
  are	
  the	
  primary	
  beneficiary	
  of	
  a	
  VIE,	
  we	
  evaluate	
  whether	
  we	
  have	
  a	
  controlling	
  financial	
  interest	
  
in	
  that	
  VIE.	
  An	
  enterprise	
  is	
  deemed	
  to	
  have	
  a	
  controlling	
  financial	
  interest	
  if	
  it	
  has	
  i)	
  the	
  power	
  to	
  direct	
  the	
  
activities	
  of	
  a	
  variable	
  interest	
  entity	
  that	
  most	
  significantly	
  impact	
  the	
  entity’s	
  economic	
  performance,	
  and	
  ii)	
  the	
  
obligation	
  to	
  absorb	
  losses	
  of	
  the	
  VIE	
  that	
  could	
  be	
  significant	
  to	
  the	
  VIE	
  or	
  the	
  rights	
  to	
  receive	
  benefits	
  from	
  the	
  
VIE	
  that	
  could	
  be	
  significant	
  to	
  the	
  VIE.	
  Control	
  can	
  also	
  be	
  demonstrated	
  by	
  the	
  ability	
  of	
  a	
  member	
  to	
  manage	
  
day-‐to-‐day	
  operations,	
  refinance	
  debt	
  and	
  sell	
  the	
  assets	
  of	
  the	
  partnerships	
  without	
  the	
  consent	
  of	
  the	
  other	
  
member	
  and	
  the	
  inability	
  of	
  the	
  members	
  to	
  replace	
  the	
  managing	
  member.	
  Based	
  on	
  our	
  examination,	
  the	
  
following	
  entities	
  were	
  determined	
  to	
  be	
  VIE’s:	
  Mystic	
  Partners,	
  LLC;	
  Mystic	
  Partners	
  Leaseco,	
  LLC;	
  South	
  Bay	
  
Boston,	
  LLC;	
  Brisam	
  Management	
  DE,	
  LLC;	
  Hersha	
  Statutory	
  Trust	
  I;	
  and	
  Hersha	
  Statutory	
  Trust	
  II.	
  Mystic	
  Partners,	
  
LLC	
  is	
  a	
  VIE	
  entity,	
  however	
  because	
  we	
  are	
  not	
  the	
  primary	
  beneficiary	
  it	
  is	
  not	
  consolidated	
  by	
  the	
  Company.	
  Our	
  
maximum	
  exposure	
  to	
  losses	
  due	
  to	
  our	
  investment	
  in	
  Mystic	
  Partners,	
  LLC	
  is	
  limited	
  to	
  our	
  investment	
  in	
  the	
  joint	
  
venture	
  which	
  is	
  $5,556	
  as	
  of	
  December	
  31,	
  2014.	
  Also,	
  Mystic	
  Partners	
  Leaseco,	
  LLC;	
  and	
  South	
  Bay	
  Boston,	
  LLC	
  
lease	
  hotel	
  properties	
  from	
  our	
  joint	
  venture	
  interests	
  and	
  are	
  VIEs.	
  These	
  entities	
  are	
  consolidated	
  by	
  the	
  lessors,	
  
the	
  primary	
  beneficiaries	
  of	
  each	
  entity.	
  Brisam	
  Management	
  DE,	
  LLC	
  is	
  consolidated	
  in	
  our	
  financial	
  statements,	
  as	
  
we	
  are	
  considered	
  to	
  be	
  the	
  primary	
  beneficiary.	
  Hersha	
  Statutory	
  Trust	
  I	
  and	
  Hersha	
  Statutory	
  Trust	
  II	
  are	
  VIEs	
  but	
  
HHLP	
  is	
  not	
  the	
  primary	
  beneficiary	
  in	
  these	
  entities.	
  Accordingly,	
  the	
  accounts	
  of	
  Hersha	
  Statutory	
  Trust	
  I	
  and	
  
Hersha	
  Statutory	
  Trust	
  II	
  are	
  not	
  consolidated	
  with	
  and	
  into	
  HHLP.	
  

We	
  allocate	
  resources	
  and	
  assess	
  operating	
  performance	
  based	
  on	
  individual	
  hotels	
  and	
  consider	
  each	
  one	
  of	
  our	
  
hotels	
  to	
  be	
  an	
  operating	
  segment.	
  All	
  of	
  our	
  individual	
  operating	
  segments	
  meet	
  the	
  aggregation	
  criteria.	
  All	
  of	
  
our	
  other	
  real	
  estate	
  investment	
  activities	
  are	
  immaterial	
  and	
  meet	
  the	
  aggregation	
  criteria,	
  and	
  thus,	
  we	
  report	
  
one	
  segment:	
  investment	
  in	
  hotel	
  properties.	
  

Use	
  of	
  Estimates	
  

The	
  preparation	
  of	
  financial	
  statements	
  in	
  conformity	
  with	
  accounting	
  principles	
  generally	
  accepted	
  in	
  the	
  United	
  
States	
  (US	
  GAAP)	
  requires	
  management	
  to	
  make	
  estimates	
  and	
  assumptions	
  that	
  affect	
  the	
  reported	
  amount	
  of	
  
assets	
  and	
  liabilities	
  and	
  disclosure	
  of	
  contingent	
  assets	
  and	
  liabilities	
  at	
  the	
  date	
  of	
  the	
  financial	
  statements	
  and	
  
the	
  reported	
  amounts	
  of	
  revenue	
  and	
  expenses	
  during	
  the	
  reporting	
  period.	
  Actual	
  results	
  could	
  differ	
  from	
  those	
  
estimates.	
  

Although	
  we	
  believe	
  the	
  assumptions	
  and	
  estimates	
  we	
  made	
  are	
  reasonable	
  and	
  appropriate,	
  as	
  discussed	
  in	
  the	
  
applicable	
  sections	
  throughout	
  these	
  Consolidated	
  Financial	
  Statements,	
  different	
  assumptions	
  and	
  estimates	
  
could	
  materially	
  impact	
  our	
  reported	
  results.	
  The	
  current	
  economic	
  environment	
  has	
  increased	
  the	
  degree	
  of	
  
uncertainty	
  inherent	
  in	
  these	
  estimates	
  and	
  assumptions	
  and	
  changes	
  in	
  market	
  conditions	
  could	
  impact	
  our	
  future	
  
operating	
  results.	
  

47 

	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

Investment	
  in	
  Hotel	
  Properties	
  

The	
  Company	
  allocates	
  the	
  purchase	
  price	
  of	
  hotel	
  properties	
  acquired	
  based	
  on	
  the	
  fair	
  value	
  of	
  the	
  acquired	
  real	
  
estate,	
  furniture,	
  fixtures	
  and	
  equipment,	
  and	
  intangible	
  assets	
  and	
  the	
  fair	
  value	
  of	
  liabilities	
  assumed,	
  including	
  
debt.	
  The	
  fair	
  value	
  allocations	
  were	
  determined	
  using	
  Level	
  3	
  inputs,	
  which	
  are	
  typically	
  unobservable	
  and	
  are	
  
based	
  on	
  our	
  own	
  assumptions,	
  as	
  there	
  is	
  little,	
  if	
  any,	
  related	
  market	
  activity.	
  The	
  Company’s	
  investments	
  in	
  
hotel	
  properties	
  are	
  carried	
  at	
  cost	
  and	
  are	
  depreciated	
  using	
  the	
  straight-‐line	
  method	
  over	
  the	
  following	
  
estimated	
  useful	
  lives:	
  

Building	
  and	
  Improvements	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   7	
  to	
  40	
  Years	
  
Furniture,	
  Fixtures	
  and	
  Equipment	
   	
   	
   	
   	
   	
   	
   	
   2	
  to	
  7	
  Years	
  

The	
  Company	
  periodically	
  reviews	
  the	
  carrying	
  value	
  of	
  each	
  hotel	
  to	
  determine	
  if	
  circumstances	
  indicate	
  
impairment	
  to	
  the	
  carrying	
  value	
  of	
  the	
  investment	
  in	
  the	
  hotel	
  or	
  that	
  depreciation	
  periods	
  should	
  be	
  modified.	
  If	
  
facts	
  or	
  circumstances	
  support	
  the	
  possibility	
  of	
  impairment,	
  the	
  Company	
  will	
  prepare	
  an	
  estimate	
  of	
  the	
  
undiscounted	
  future	
  cash	
  flows,	
  without	
  interest	
  charges,	
  of	
  the	
  specific	
  hotel.	
  Based	
  on	
  the	
  properties	
  
undiscounted	
  future	
  cash	
  flows,	
  the	
  Company	
  will	
  determine	
  if	
  the	
  investment	
  in	
  such	
  hotel	
  is	
  recoverable.	
  If	
  
impairment	
  is	
  indicated,	
  an	
  adjustment	
  will	
  be	
  made	
  to	
  reduce	
  the	
  carrying	
  value	
  of	
  the	
  hotel	
  to	
  reflect	
  the	
  hotel	
  at	
  
fair	
  value.	
  

We	
  consider	
  a	
  hotel	
  to	
  be	
  held	
  for	
  sale	
  when	
  management	
  and	
  our	
  independent	
  trustees	
  commit	
  to	
  a	
  plan	
  to	
  sell	
  
the	
  property,	
  the	
  property	
  is	
  available	
  for	
  sale,	
  management	
  engages	
  in	
  an	
  active	
  program	
  to	
  locate	
  a	
  buyer	
  for	
  the	
  
property	
  and	
  it	
  is	
  probable	
  the	
  sale	
  will	
  be	
  completed	
  within	
  a	
  year	
  of	
  the	
  initiation	
  of	
  the	
  plan	
  to	
  sell.	
  

Acquisition-‐related	
  cost,	
  such	
  as	
  due	
  diligence,	
  legal	
  and	
  accounting	
  fees,	
  are	
  not	
  capitalized	
  or	
  applied	
  in	
  
determining	
  the	
  fair	
  value	
  of	
  the	
  above	
  acquired	
  assets.	
   	
   	
  

Investment	
  in	
  Unconsolidated	
  Joint	
  Ventures	
  

If	
  it	
  is	
  determined	
  that	
  we	
  do	
  not	
  have	
  a	
  controlling	
  interest	
  in	
  a	
  joint	
  venture,	
  either	
  through	
  our	
  financial	
  interest	
  
in	
  a	
  VIE	
  or	
  our	
  voting	
  interest	
  in	
  a	
  voting	
  interest	
  entity,	
  the	
  equity	
  method	
  of	
  accounting	
  is	
  used.	
  Under	
  this	
  
method,	
  the	
  investment,	
  originally	
  recorded	
  at	
  cost,	
  is	
  adjusted	
  to	
  recognize	
  our	
  share	
  of	
  net	
  earnings	
  or	
  losses	
  of	
  
the	
  affiliates	
  as	
  they	
  occur	
  rather	
  than	
  as	
  dividends	
  or	
  other	
  distributions	
  are	
  received,	
  limited	
  to	
  the	
  extent	
  of	
  our	
  
investment	
  in,	
  advances	
  to	
  and	
  commitments	
  for	
  the	
  investee.	
  Pursuant	
  to	
  our	
  joint	
  venture	
  agreements,	
  
allocations	
  of	
  profits	
  and	
  losses	
  of	
  some	
  of	
  our	
  investments	
  in	
  unconsolidated	
  joint	
  ventures	
  may	
  be	
  allocated	
  
disproportionately	
  as	
  compared	
  to	
  nominal	
  ownership	
  percentages	
  due	
  to	
  specified	
  preferred	
  return	
  rate	
  
thresholds.	
  

The	
  Company	
  periodically	
  reviews	
  the	
  carrying	
  value	
  of	
  its	
  investment	
  in	
  unconsolidated	
  joint	
  ventures	
  to	
  
determine	
  if	
  circumstances	
  indicate	
  impairment	
  to	
  the	
  carrying	
  value	
  of	
  the	
  investment	
  that	
  is	
  other	
  than	
  
temporary.	
  When	
  an	
  impairment	
  indicator	
  is	
  present,	
  we	
  will	
  estimate	
  the	
  fair	
  value	
  of	
  the	
  investment.	
  Our	
  
estimate	
  of	
  fair	
  value	
  takes	
  into	
  consideration	
  factors	
  such	
  as	
  expected	
  future	
  operating	
  income,	
  trends	
  and	
  
prospects,	
  as	
  well	
  as	
  the	
  effects	
  of	
  demand,	
  competition	
  and	
  other	
  factors.	
  This	
  determination	
  requires	
  significant	
  
estimates	
  by	
  management,	
  including	
  the	
  expected	
  cash	
  flows	
  to	
  be	
  generated	
  by	
  the	
  assets	
  owned	
  and	
  operated	
  
by	
  the	
  joint	
  venture.	
  To	
  the	
  extent	
  impairment	
  has	
  occurred	
  and	
  the	
  impairment	
  is	
  considered	
  other	
  than	
  
temporary,	
  the	
  loss	
  will	
  be	
  measured	
  as	
  the	
  excess	
  of	
  the	
  carrying	
  amount	
  over	
  the	
  fair	
  value	
  of	
  our	
  investment	
  in	
  
the	
  unconsolidated	
  joint	
  venture.	
  

Cash	
  and	
  Cash	
  Equivalents	
  

Cash	
  and	
  cash	
  equivalents	
  represent	
  cash	
  on	
  hand	
  and	
  in	
  banks	
  plus	
  short-‐term	
  investments	
  with	
  an	
  initial	
  
maturity	
  of	
  three	
  months	
  or	
  less	
  when	
  purchased.	
  

48 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

Escrow	
  Deposits	
  

Escrow	
  deposits	
  include	
  reserves	
  for	
  debt	
  service,	
  real	
  estate	
  taxes,	
  and	
  insurance	
  and	
  reserves	
  for	
  furniture,	
  
fixtures,	
  and	
  equipment	
  replacements,	
  as	
  required	
  by	
  certain	
  mortgage	
  debt	
  agreement	
  restrictions	
  and	
  
provisions.	
  

Hotel	
  Accounts	
  Receivable	
  

Hotel	
  accounts	
  receivable	
  consists	
  primarily	
  of	
  meeting	
  and	
  banquet	
  room	
  rental	
  and	
  hotel	
  guest	
  receivables.	
  The	
  
Company	
  generally	
  does	
  not	
  require	
  collateral.	
  Ongoing	
  credit	
  evaluations	
  are	
  performed	
  and	
  an	
  allowance	
  for	
  
potential	
  losses	
  from	
  uncollectible	
  accounts	
  is	
  provided	
  against	
  the	
  portion	
  of	
  accounts	
  receivable	
  that	
  is	
  estimated	
  
to	
  be	
  uncollectible.	
  

Deferred	
  Financing	
  Costs	
  

Deferred	
  financing	
  costs	
  are	
  recorded	
  at	
  cost	
  and	
  amortized	
  over	
  the	
  terms	
  of	
  the	
  related	
  indebtedness	
  using	
  the	
  
effective	
  interest	
  method.	
  

Due	
  from/to	
  Related	
  Parties	
  

Due	
  from/to	
  Related	
  Parties	
  represents	
  current	
  receivables	
  and	
  payables	
  resulting	
  from	
  transactions	
  related	
  to	
  
hotel	
  management	
  and	
  project	
  management	
  with	
  affiliated	
  entities.	
  Due	
  from	
  related	
  parties	
  results	
  primarily	
  from	
  
advances	
  of	
  shared	
  costs	
  incurred	
  and	
  interest	
  receivable	
  on	
  development	
  loans	
  made	
  to	
  related	
  parties.	
  Due	
  to	
  
affiliates	
  results	
  primarily	
  from	
  hotel	
  management	
  and	
  project	
  management	
  fees	
  incurred.	
  Both	
  due	
  to	
  and	
  due	
  
from	
  related	
  parties	
  are	
  generally	
  settled	
  within	
  a	
  period	
  not	
  to	
  exceed	
  one	
  year.	
  

Intangible	
  Assets	
  and	
  Liabilities	
  

Intangible	
  assets	
  consist	
  of	
  leasehold	
  intangibles	
  for	
  above-‐market	
  value	
  of	
  in-‐place	
  leases	
  and	
  deferred	
  franchise	
  
fees.	
  The	
  leasehold	
  intangibles	
  are	
  amortized	
  over	
  the	
  remaining	
  lease	
  term.	
  Deferred	
  franchise	
  fees	
  are	
  amortized	
  
using	
  the	
  straight-‐line	
  method	
  over	
  the	
  life	
  of	
  the	
  franchise	
  agreement.	
   	
   	
  

Intangible	
  liabilities	
  consist	
  of	
  leasehold	
  intangibles	
  for	
  below-‐market	
  value	
  of	
  in-‐place	
  leases.	
  The	
  leasehold	
  
intangibles	
  are	
  amortized	
  over	
  the	
  remaining	
  lease	
  term.	
  Intangible	
  liabilities	
  are	
  included	
  in	
  the	
  accounts	
  payable,	
  
accrued	
  expenses	
  and	
  other	
  liabilities	
  on	
  the	
  Company’s	
  consolidated	
  balance	
  sheets.	
  

Development	
  Project	
  Capitalization	
  

We	
  have	
  opportunistically	
  engaged	
  in	
  the	
  development	
  and	
  re-‐development	
  of	
  hotel	
  assets.	
  We	
  capitalize	
  
expenditures	
  related	
  to	
  hotel	
  development	
  projects	
  and	
  renovations,	
  including	
  indirect	
  costs	
  such	
  as	
  interest	
  
expense,	
  real	
  estate	
  taxes	
  and	
  utilities	
  related	
  to	
  hotel	
  development	
  projects	
  and	
  renovations.	
  

Noncontrolling	
  Interest	
  

Noncontrolling	
  interest	
  in	
  the	
  Partnership	
  represents	
  the	
  limited	
  partner’s	
  proportionate	
  share	
  of	
  the	
  equity	
  of	
  the	
   	
  
Partnership.	
  Income	
  (loss)	
  is	
  allocated	
  to	
  noncontrolling	
  interest	
  in	
  accordance	
  with	
  the	
  weighted	
  average	
  
percentage	
  ownership	
  of	
  the	
  Partnership	
  during	
  the	
  period.	
  At	
  the	
  end	
  of	
  each	
  reporting	
  period	
  the	
  appropriate	
  
adjustments	
  to	
  the	
  income	
  (loss)	
  are	
  made	
  based	
  upon	
  the	
  weighted	
  average	
  percentage	
  ownership	
  of	
  the	
  
Partnership	
  during	
  the	
  period.	
  Our	
  ownership	
  interest	
  in	
  the	
  Partnership	
  as	
  of	
  December	
  31,	
  2014,	
  2013	
  and	
  2012	
  
was	
  95.8%,	
  96.7%,	
  and	
  96.5%,	
  respectively.	
  

49 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

We	
  define	
  a	
  noncontrolling	
  interest	
  as	
  the	
  portion	
  of	
  equity	
  in	
  a	
  subsidiary	
  not	
  attributable,	
  directly	
  or	
  indirectly,	
  to	
  
a	
  parent.	
  Such	
  noncontrolling	
  interests	
  are	
  reported	
  on	
  the	
  consolidated	
  balance	
  sheets	
  within	
  equity,	
  but	
  
separately	
  from	
  the	
  shareholders’	
  equity.	
  Revenues,	
  expenses	
  and	
  net	
  income	
  or	
  loss	
  attributable	
  to	
  both	
  the	
  
Company	
  and	
  noncontrolling	
  interests	
  are	
  reported	
  on	
  the	
  consolidated	
  statements	
  of	
  operations.	
  

In	
  accordance	
  with	
  US	
  GAAP,	
  we	
  classify	
  securities	
  that	
  are	
  redeemable	
  for	
  cash	
  or	
  other	
  assets	
  at	
  the	
  option	
  of	
  the	
  
holder,	
  or	
  not	
  solely	
  within	
  the	
  control	
  of	
  the	
  issuer,	
  outside	
  of	
  permanent	
  equity	
  in	
  the	
  consolidated	
  balance	
  
sheet.	
  The	
  Company	
  makes	
  this	
  determination	
  based	
  on	
  terms	
  in	
  applicable	
  agreements,	
  specifically	
  in	
  relation	
  to	
  
redemption	
  provisions.	
  Additionally,	
  with	
  respect	
  to	
  noncontrolling	
  interests	
  for	
  which	
  the	
  Company	
  has	
  a	
  choice	
  
to	
  settle	
  the	
  contract	
  by	
  delivery	
  of	
  its	
  own	
  shares,	
  the	
  Company	
  considers	
  the	
  guidance	
  in	
  US	
  GAAP	
  to	
  evaluate	
  
whether	
  the	
  Company	
  controls	
  the	
  actions	
  or	
  events	
  necessary	
  to	
  issue	
  the	
  maximum	
  number	
  of	
  common	
  shares	
  
that	
  could	
  be	
  required	
  to	
  be	
  delivered	
  at	
  the	
  time	
  of	
  settlement	
  of	
  the	
  contract.	
  

We	
  classify	
  the	
  noncontrolling	
  interests	
  of	
  our	
  consolidated	
  joint	
  ventures,	
  consolidated	
  variable	
  interest	
  entity,	
  
and	
  certain	
  Common	
  Units	
  (“Nonredeemable	
  Common	
  Units”)	
  as	
  equity.	
  The	
  noncontrolling	
  interests	
  of	
  
Nonredeemable	
  Common	
  Units	
  totaled	
  $29,082	
  as	
  of	
  December	
  31,	
  2014	
  and	
  $29,523	
  as	
  of	
  December	
  31,	
  2013.	
  As	
  
of	
  December	
  31,	
  2014,	
  there	
  were	
  8,797,736	
  Nonredeemable	
  Common	
  Units	
  outstanding	
  with	
  a	
  fair	
  market	
  value	
  
of	
  $61,848,	
  based	
  on	
  the	
  price	
  per	
  share	
  of	
  our	
  common	
  shares	
  on	
  the	
  NYSE	
  on	
  such	
  date.	
  

In	
  accordance	
  with	
  the	
  partnership	
  agreement	
  of	
  the	
  Partnership,	
  holders	
  of	
  these	
  units	
  may	
  redeem	
  them	
  for	
  cash	
  
unless	
  we,	
  in	
  our	
  sole	
  and	
  absolute	
  discretion,	
  elect	
  to	
  issue	
  common	
  shares	
  on	
  a	
  one-‐for-‐one	
  basis	
  in	
  lieu	
  of	
  paying	
  
cash.	
  

Prior	
  to	
  February	
  1,	
  2013,	
  certain	
  Common	
  Units	
  (“Redeemable	
  Common	
  Units”)	
  had	
  been	
  pledged	
  as	
  collateral	
  in	
  
connection	
  with	
  a	
  pledge	
  and	
  security	
  agreement	
  entered	
  into	
  by	
  the	
  Company	
  and	
  the	
  holders	
  of	
  the	
  Redeemable	
  
Common	
  Units.	
  The	
  redemption	
  feature	
  contained	
  in	
  the	
  pledge	
  and	
  security	
  agreement	
  where	
  the	
  Redeemable	
  
Common	
  Units	
  served	
  as	
  collateral	
  contains	
  a	
  provision	
  that	
  could	
  result	
  in	
  a	
  net	
  cash	
  settlement	
  outside	
  of	
  the	
  
control	
  of	
  the	
  Company.	
  As	
  a	
  result,	
  prior	
  to	
  February	
  1,	
  2013,	
  the	
  Redeemable	
  Common	
  Units	
  were	
  classified	
  in	
  
the	
  mezzanine	
  section	
  of	
  the	
  consolidated	
  balance	
  sheets	
  as	
  they	
  did	
  not	
  meet	
  the	
  requirements	
  for	
  equity	
  
classification	
  under	
  US	
  GAAP.	
  Effective	
  February	
  1,	
  2013,	
  the	
  aforementioned	
  pledge	
  and	
  security	
  agreement	
  is	
  no	
  
longer	
  in	
  place	
  and	
  therefore	
  these	
  Common	
  Units	
  have	
  been	
  treated	
  as	
  Nonredeemable	
  Common	
  Units.	
  The	
  
carrying	
  value	
  of	
  the	
  Redeemable	
  Common	
  Units	
  equals	
  the	
  greater	
  of	
  carrying	
  value	
  based	
  on	
  the	
  accumulation	
  of	
  
historical	
  cost	
  or	
  the	
  redemption	
  value.	
   	
   As	
  of	
  December	
  31,	
  2014	
  and	
  2013,	
  there	
  were	
  no	
  outstanding	
  Common	
  
Units	
  designated	
  as	
  Redeemable	
  Common	
  Units.	
   	
  

Net	
  income	
  or	
  loss	
  attributed	
  to	
  Nonredeemable	
  Common	
  Units	
  and	
  Redeemable	
  Common	
  Units	
  (collectively,	
  
“Common	
  Units”),	
  as	
  well	
  as	
  the	
  net	
  income	
  or	
  loss	
  related	
  to	
  the	
  noncontrolling	
  interests	
  of	
  our	
  consolidated	
  joint	
  
venture	
  and	
  consolidated	
  variable	
  interest	
  entity,	
  is	
  included	
  in	
  net	
  income	
  or	
  loss	
  in	
  the	
  consolidated	
  statements	
  
of	
  operations.	
  Net	
  income	
  or	
  loss	
  attributed	
  to	
  the	
  Common	
  Units	
  and	
  the	
  noncontrolling	
  interests	
  of	
  our	
  
consolidated	
  joint	
  ventures	
  and	
  consolidated	
  variable	
  interest	
  entity	
  is	
  excluded	
  from	
  net	
  income	
  or	
  loss	
  applicable	
  
to	
  common	
  shareholders	
  in	
  the	
  consolidated	
  statements	
  of	
  operations.	
  

Shareholders’	
  Equity	
  

On	
  February	
  25,	
  2013,	
  we	
  completed	
  a	
  public	
  offering	
  of	
  3,000,000	
  6.875%	
  Series	
  C	
  Cumulative	
  Redeemable	
   	
  
Preferred	
  Shares.	
  These	
  shares	
  have	
  a	
  par	
  value	
  of	
  $0.01	
  per	
  share	
  with	
  a	
  $25.00	
  liquidation	
  preference	
  per	
  share.	
  
Net	
  proceeds	
  of	
  the	
  offering,	
  after	
  deducting	
  the	
  underwriting	
  discount	
  and	
  the	
  offering	
  expenses	
  payable	
  by	
  us,	
  
were	
  approximately	
  $72,370.	
   	
  

We	
  utilized	
  the	
  net	
  proceeds	
  of	
  the	
  offering	
  to	
  redeem	
  all	
  outstanding	
  8.00%	
  Series	
  A	
  Cumulative	
  Redeemable	
  
Preferred	
  Shares	
  on	
  March	
  28,	
  2013,	
  and	
  for	
  general	
  corporate	
  purposes.	
   	
   The	
  Series	
  A	
  Preferred	
  Shares	
  were	
   	
  

50 

	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

redeemed	
  at	
  a	
  per	
  share	
  redemption	
  price	
  of	
  $25.00	
  together	
  with	
  accrued	
  and	
  unpaid	
  dividends	
  to	
  the	
  
redemption	
  date	
  for	
  an	
  aggregate	
  per	
  share	
  redemption	
  price	
  of	
  $25.4056.	
  	
  Dividends	
  ceased	
  accruing	
  on	
  the	
  
Series	
  A	
  Preferred	
  Shares	
  on	
  March	
  28,	
  2013.	
  

Terms	
  of	
  the	
  Series	
  B	
  and	
  Series	
  C	
  Preferred	
  Shares	
  outstanding	
  at	
  December	
  31,	
  2014	
  and	
  2013	
  are	
  summarized	
  
as	
  follows:	
  

Shares	
  Outstanding	
  

Dividend	
  Per	
  Share	
   	
   	
   	
  
	
   Year	
  Ended	
  December	
  31,	
   	
  

	
   December	
  31,	
  
2014	
  

	
   December	
  31,	
  
2013	
  

Aggregate	
  
Liquidation	
  
Preference	
  	
  

Distribution	
  
Rate	
  

2014	
  

2013	
  

	
   4,600,000	
  	
   	
  
	
   3,000,000	
  	
   	
  
	
   7,600,000	
  	
  	
  

	
   4,600,000	
  	
  	
   $	
  
	
   3,000,000	
  	
  	
  
	
   7,600,000	
  	
  	
  

	
   115,000	
  	
  
	
   75,000	
  	
  

8.000%	
  	
   $	
  
6.875%	
  	
  

	
   2.0000	
  	
  	
   $	
  
	
   1.7188	
  	
  	
  

	
   2.0000	
  	
  
	
   1.4753	
  	
  

Series	
  

Series	
  B	
  
Series	
  C	
  
Total	
  

In	
  December	
  2012,	
  our	
  Board	
  of	
  Trustees	
  authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  aggregate	
  of	
  
$75,000	
  of	
  our	
  outstanding	
  common	
  shares	
  through	
  December	
  31,	
  2013.	
  We	
  did	
  not	
  repurchase	
  any	
  common	
  
shares	
  prior	
  to	
  the	
  expiration	
  of	
  the	
  share	
  repurchase	
  program.	
  In	
  January	
  2014,	
  our	
  Board	
  of	
  Trustees	
  again	
  
authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  aggregate	
  of	
  $75,000	
  of	
  our	
  outstanding	
  common	
  shares.	
  
In	
  February	
  2015,	
  our	
  Board	
  of	
  Trustees	
  again	
  authorized	
  us	
  to	
  repurchase	
  from	
  time	
  to	
  time	
  up	
  to	
  an	
  aggregate	
  of	
  
$100,000	
  of	
  our	
  outstanding	
  shares.	
  The	
  current	
  share	
  repurchase	
  program	
  will	
  expire	
  on	
  December	
  31,	
  2015.	
  For	
  
the	
  year	
  ended	
  December	
  31,	
  2014,	
  the	
  Company	
  repurchased	
  2,626,854	
  common	
  shares	
  for	
  an	
  aggregate	
  
purchase	
  price	
  of	
  $15,418.	
  As	
  of	
  February	
  20,	
  2015,	
  we	
  have	
  not	
  repurchased	
  any	
  common	
  shares	
  pursuant	
  to	
  the	
  
newly	
  reauthorized	
  share	
  repurchase	
  program.	
  Upon	
  repurchase	
  by	
  the	
  Company,	
  these	
  common	
  shares	
  ceased	
  to	
  
be	
  outstanding	
  and	
  became	
  authorized	
  but	
  unissued	
  common	
  shares.	
   	
  

On	
  August	
  4,	
  2009,	
  we	
  entered	
  into	
  a	
  purchase	
  agreement	
  with	
  Real	
  Estate	
  Investment	
  Group	
  L.P.	
  (“REIG”),	
  
pursuant	
  to	
  which	
  we	
  sold	
  5,700,000	
  common	
  shares	
  at	
  a	
  price	
  of	
  $2.50	
  per	
  share	
  to	
  REIG	
  for	
  gross	
  proceeds	
  of	
  
$14,250.	
  We	
  also	
  granted	
  REIG	
  the	
  option	
  to	
  buy	
  up	
  to	
  an	
  additional	
  5,700,000	
  common	
  shares	
  at	
  a	
  price	
  of	
  $3.00	
  
per	
  share,	
  which	
  was	
  exercisable	
  through	
  August	
  4,	
  2014.	
  On	
  February	
  13,	
  2012,	
  pursuant	
  to	
  the	
  terms	
  of	
  the	
  
original	
  option,	
  we	
  called	
  in	
  and	
  canceled	
  the	
  option	
  granted	
  to	
  REIG	
  in	
  exchange	
  for	
  the	
  issuance	
  of	
  2,521,561	
  
common	
  shares	
  with	
  an	
  aggregate	
  value	
  equal	
  to	
  $13,566.	
  This	
  amount	
  equals	
  the	
  volume	
  weighted	
  average	
  price	
  
per	
  common	
  share	
  for	
  the	
  20	
  trading	
  days	
  prior	
  to	
  the	
  exercise	
  of	
  the	
  option,	
  less	
  the	
  $3.00	
  option	
  price,	
  multiplied	
  
by	
  the	
  5,700,000	
  common	
  shares	
  remaining	
  under	
  the	
  option.	
  

On	
  December	
  23,	
  2014,	
  we	
  amended	
  our	
  partnership	
  agreement	
  to	
  allow	
  for	
  the	
  issuance	
  of	
  profits	
  interests	
  in	
  
HHLP	
  in	
  the	
  form	
  of	
  LTIP	
  Units,	
  a	
  new	
  class	
  of	
  limited	
  partnership	
  units	
  in	
  HHLP,	
  and	
  to	
  establish	
  the	
  terms	
  of	
  the	
  
LTIP	
  Units.	
  The	
  LTIP	
  Units	
  vest	
  on	
  December	
  31	
  and	
  June	
  1	
  of	
  each	
  year,	
  beginning	
  on	
  December	
  31,	
  2014	
  and	
   	
  
ending	
  on	
  June	
  1,	
  2017.	
  The	
  LTIP	
  units	
  contain	
  restricted	
  stock	
  awards	
  that	
  were	
  forfeited	
  and	
  replaced	
  with	
  LTIP	
  
unit	
  awards	
  with	
  similar	
  terms.	
  The	
  total	
  number	
  of	
  Restricted	
  Stock	
  Awards	
  forfeited	
  and	
  LTIP	
  Units	
  awarded	
  was	
  
1,948,324.	
  

Stock	
  Based	
  Compensation	
  

We	
  measure	
  the	
  cost	
  of	
  employee	
  service	
  received	
  in	
  exchange	
  for	
  an	
  award	
  of	
  equity	
  instruments	
  based	
  on	
  the	
  
grant-‐date	
  fair	
  value	
  of	
  the	
  award.	
  The	
  compensation	
  cost	
  is	
  amortized	
  on	
  a	
  straight	
  line	
  basis	
  over	
  the	
  period	
  
during	
  which	
  an	
  employee	
  is	
  required	
  to	
  provide	
  service	
  in	
  exchange	
  for	
  the	
  award.	
  The	
  compensation	
  cost	
  related	
  
to	
  performance	
  awards	
  that	
  are	
  contingent	
  upon	
  market	
  based	
  criteria	
  being	
  met	
  is	
  recorded	
  at	
  the	
  fair	
  value	
  of	
   	
   	
  
the	
  award	
  on	
  the	
  date	
  of	
  the	
  grant	
  and	
  amortized	
  over	
  the	
  performance	
  period.	
  

51 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

Derivatives	
  and	
  Hedging	
  

The	
  Company’s	
  objective	
  in	
  using	
  derivatives	
  is	
  to	
  add	
  stability	
  to	
  interest	
  expense	
  and	
  to	
  manage	
  its	
  exposure	
  to	
  
interest	
  rate	
  movements.	
  To	
  accomplish	
  this	
  objective,	
  the	
  Company	
  primarily	
  uses	
  interest	
  rate	
  swaps	
  and	
  
interest	
  rate	
  caps	
  as	
  part	
  of	
  its	
  cash	
  flow	
  hedging	
  strategy.	
  Interest	
  rate	
  swaps	
  designated	
  as	
  cash	
  flow	
  hedges	
  
involve	
  the	
  receipt	
  of	
  variable-‐rate	
  amounts	
  in	
  exchange	
  for	
  fixed-‐rate	
  payments	
  over	
  the	
  life	
  of	
  the	
  agreements	
  
without	
  exchange	
  of	
  the	
  underlying	
  principal	
  amount.	
  Interest	
  rate	
  caps	
  designated	
  as	
  cash	
  flow	
  hedges	
  limit	
  the	
  
Company’s	
  exposure	
  to	
  increased	
  cash	
  payments	
  due	
  to	
  increases	
  in	
  variable	
  interest	
  rates.	
  

Revenue	
  Recognition	
  

We	
  recognize	
  revenue	
  and	
  expense	
  for	
  all	
  consolidated	
  hotels	
  as	
  hotel	
  operating	
  revenue	
  and	
  hotel	
  operating	
  
expense	
  when	
  earned	
  and	
  incurred.	
  These	
  revenues	
  are	
  recorded	
  net	
  of	
  any	
  sales	
  or	
  occupancy	
  taxes	
  collected	
  
from	
  our	
  guests.	
  We	
  participate	
  in	
  frequent	
  guest	
  programs	
  sponsored	
  by	
  the	
  brand	
  owners	
  of	
  our	
  hotels	
  and	
  we	
  
expense	
  the	
  charges	
  associated	
  with	
  those	
  programs,	
  as	
  incurred.	
  

Interest	
  income	
  on	
  development	
  loan	
  financing	
  is	
  recorded	
  in	
  the	
  period	
  earned	
  based	
  on	
  the	
  interest	
  rate	
  of	
  the	
  
loan	
  and	
  outstanding	
  balance	
  during	
  the	
  period.	
  Development	
  loans	
  receivable	
  and	
  accrued	
  interest	
  on	
  the	
  
development	
  loans	
  receivable	
  are	
  evaluated	
  to	
  determine	
  if	
  outstanding	
  balances	
  are	
  collectible.	
  Interest	
  is	
  
recorded	
  only	
  if	
  it	
  is	
  determined	
  the	
  outstanding	
  loan	
  balance	
  and	
  accrued	
  interest	
  balance	
  are	
  collectible.	
  

Other	
  revenues	
  consist	
  primarily	
  of	
  fees	
  earned	
  for	
  asset	
  management	
  services	
  provided	
  to	
  hotels	
  we	
  own	
  through	
  
unconsolidated	
  joint	
  ventures.	
  Fees	
  are	
  earned	
  as	
  a	
  percentage	
  of	
  hotel	
  revenue	
  and	
  are	
  recorded	
  in	
  the	
  period	
  
earned	
  to	
  the	
  extent	
  of	
  the	
  noncontrolling	
  interest	
  ownership.	
  

Income	
  Taxes	
  

The	
  Company	
  qualifies	
  as	
  a	
  REIT	
  under	
  applicable	
  provisions	
  of	
  the	
  Internal	
  Revenue	
  Code,	
  as	
  amended,	
  and	
  
intends	
  to	
  continue	
  to	
  qualify	
  as	
  a	
  REIT.	
  In	
  general,	
  under	
  such	
  provisions,	
  a	
  trust	
  which	
  has	
  made	
  the	
  required	
  
election	
  and,	
  in	
  the	
  taxable	
  year,	
  meets	
  certain	
  requirements	
  and	
  distributes	
  to	
  its	
  shareholders	
  at	
  least	
  90%	
  of	
  its	
  
REIT	
  taxable	
  income	
  will	
  not	
  be	
  subject	
  to	
  Federal	
  income	
  tax	
  to	
  the	
  extent	
  of	
  the	
  income	
  which	
  it	
  distributes.	
  
Earnings	
  and	
  profits,	
  which	
  determine	
  the	
  taxability	
  of	
  dividends	
  to	
  shareholders,	
  differ	
  from	
  net	
  income	
  reported	
  
for	
  financial	
  reporting	
  purposes	
  due	
  primarily	
  to	
  differences	
  in	
  depreciation	
  of	
  hotel	
  properties	
  for	
  Federal	
  income	
  
tax	
  purposes.	
  

Deferred	
  income	
  taxes	
  relate	
  primarily	
  to	
  the	
  TRS	
  Lessee	
  and	
  are	
  accounted	
  for	
  using	
  the	
  asset	
  and	
  liability	
  
method.	
  Under	
  this	
  method,	
  deferred	
  income	
  taxes	
  are	
  recognized	
  for	
  temporary	
  differences	
  between	
  the	
  
financial	
  reporting	
  bases	
  of	
  assets	
  and	
  liabilities	
  of	
  the	
  TRS	
  Lessee	
  and	
  their	
  respective	
  tax	
  bases	
  and	
  for	
  their	
  
operating	
  loss	
  and	
  tax	
  credit	
  carry	
  forwards	
  based	
  on	
  enacted	
  tax	
  rates	
  expected	
  to	
  be	
  in	
  effect	
  when	
  such	
   	
  
amounts	
  are	
  realized	
  or	
  settled.	
  However,	
  deferred	
  tax	
  assets	
  are	
  recognized	
  only	
  to	
  the	
  extent	
  that	
  it	
  is	
  more	
  
likely	
  than	
  not	
  that	
  they	
  will	
  be	
  realized	
  based	
  on	
  consideration	
  of	
  available	
  evidence,	
  including	
  tax	
  planning	
  
strategies	
  and	
  other	
  factors.	
  

The	
  Company	
  may	
  recognize	
  a	
  tax	
  benefit	
  from	
  an	
  uncertain	
  tax	
  position	
  when	
  it	
  is	
  more-‐likely-‐than-‐not	
  (defined	
  
as	
  a	
  likelihood	
  of	
  more	
  than	
  50%)	
  that	
  the	
  position	
  will	
  be	
  sustained	
  upon	
  examination,	
  including	
  resolutions	
  of	
  any	
  
related	
  appeals	
  or	
  litigation	
  processes,	
  based	
  on	
  the	
  technical	
  merits.	
  If	
  a	
  tax	
  position	
  does	
  not	
  meet	
  the	
  
more-‐likely-‐than-‐not	
  recognition	
  threshold,	
  despite	
  the	
  Company’s	
  belief	
  that	
  its	
  filing	
  position	
  is	
  supportable,	
  the	
  
benefit	
  of	
  that	
  tax	
  position	
  is	
  not	
  recognized	
  in	
  the	
  statements	
  of	
  operations.	
  The	
  Company	
  recognizes	
  interest	
  and	
  
penalties,	
  as	
  applicable,	
  related	
  to	
  unrecognized	
  tax	
  benefits	
  as	
  a	
  component	
  of	
  income	
  tax	
  expense.	
  The	
  Company	
  
recognizes	
  unrecognized	
  tax	
  benefits	
  in	
  the	
  period	
  that	
  the	
  uncertainty	
  is	
  eliminated	
  by	
  either	
  affirmative	
  
agreement	
  of	
  the	
  uncertain	
  tax	
  position	
  by	
  the	
  applicable	
  taxing	
  authority,	
  or	
  by	
  expiration	
  of	
  the	
  applicable	
   	
  

52 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  1	
  –	
  ORGANIZATION	
  AND	
  SUMMARY	
  OF	
  SIGNIFICANT	
  ACCOUNTING	
  POLICIES	
  (CONTINUED)	
  

statute	
  of	
  limitation.	
  For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  2012,	
  the	
  Company	
  did	
  not	
  record	
  any	
  
uncertain	
  tax	
  positions.	
  As	
  of	
  December	
  31,	
  2014,	
  with	
  few	
  exceptions,	
  the	
  Company	
  is	
  subject	
  to	
  tax	
  examinations	
  
by	
  U.S.	
  federal,	
  state,	
  and	
  local	
  income	
  tax	
  authorities	
  for	
  years	
  2003	
  through	
  2014.	
  

Reclassification	
  

Certain	
  amounts	
  in	
  the	
  prior	
  year	
  financial	
  statements	
  have	
  been	
  reclassified	
  to	
  conform	
  to	
  the	
  current	
  year	
  
presentation.	
  

New	
  Accounting	
  Pronouncements	
   	
  

On	
  May	
  28,	
  2014,	
  the	
  FASB	
  issued	
  ASU	
  No.	
  2014-‐09,	
  Revenue	
  from	
  Contracts	
  with	
  Customers,	
  which	
  requires	
  an	
  
entity	
  to	
  recognize	
  the	
  amount	
  of	
  revenue	
  to	
  which	
  it	
  expects	
  to	
  be	
  entitled	
  for	
  the	
  transfer	
  of	
  promised	
  goods	
  or	
  
services	
  to	
  customers.	
  	
  The	
  ASU	
  will	
  replace	
  most	
  existing	
  revenue	
  recognition	
  guidance	
  in	
  U.S.	
  GAAP	
  when	
  it	
  
becomes	
  effective.	
  	
  The	
  new	
  standard	
  is	
  effective	
  for	
  the	
  Company	
  on	
  January	
  1,	
  2017.	
  	
  Early	
  adoption	
  is	
  not	
  
permitted.	
  	
  The	
  standard	
  permits	
  the	
  use	
  of	
  either	
  the	
  retrospective	
  or	
  cumulative	
  effect	
  transition	
  method.	
  	
  The	
  
Company	
  is	
  evaluating	
  the	
  effect	
  that	
  ASU	
  No.	
  2014-‐09	
  will	
  have	
  on	
  its	
  consolidated	
  financial	
  statements	
  and	
  
related	
  disclosures.	
  	
  The	
  Company	
  has	
  not	
  yet	
  selected	
  a	
  transition	
  method	
  nor	
  has	
  it	
  determined	
  the	
  effect	
  of	
  the	
  
standard	
  on	
  its	
  ongoing	
  financial	
  reporting.	
  

53 

	
  
	
   	
  
	
  
	
  
	
  	
   	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  2	
  –	
  INVESTMENT	
  IN	
  HOTEL	
  PROPERTIES	
  

Investment	
  in	
  hotel	
  properties	
  consists	
  of	
  the	
  following	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013:	
  

	
   December	
  31,	
  2014	
  

	
   December	
  31,	
  2013	
  

Land	
  
Buildings	
  and	
  Improvements	
  
Furniture,	
  Fixtures	
  and	
  Equipment	
  
Construction	
  in	
  Progress	
  

$	
  

Less	
  Accumulated	
  Depreciation	
  

$	
  

	
   439,540	
  	
  
	
   1,424,842	
  	
  
	
   203,275	
  	
  
	
   -‐	
  	
  
	
   2,067,657	
  	
  

	
   (322,174)	
  	
  

	
   339,027	
  
	
   1,222,639	
  
	
   171,116	
  
	
   63,168	
  
	
   1,795,950	
  

	
   (260,115)	
  

Total	
  Investment	
  in	
  Hotel	
  Properties	
  

$	
  

	
   1,745,483	
  	
  

$	
  

	
   1,535,835	
  

Depreciation	
  expense	
  was	
  $68,418,	
  $61,500	
  and	
  $55,956	
  (including	
  depreciation	
  on	
  assets	
  held	
  for	
  sale)	
  for	
  the	
  
years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  we	
  acquired	
  the	
  following	
  wholly-‐owned	
  hotel	
  properties:	
  

Hotel	
   	
  

Acquisition	
  
Date	
  

Land	
   	
  

Buildings	
  and	
  
Improvements	
   	
  	
   	
  

Furniture	
  
Fixtures	
  
and	
  
Equipment	
   	
  	
   	
  

Ground	
  
Lease	
  
Intangible	
   	
   	
  

Franchise	
  
Fees	
  and	
  
Loan	
  
Costs	
  

Total	
  
Purchase	
  

Price	
   	
   	
   	
  

Assumption	
  
of	
  Debt	
  

Hotel	
  Milo,	
  
Santa	
  Barbara,	
  CA	
  

Parrot	
  Key	
  Resort,	
   	
  
Key	
  West,	
  FL	
  

Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
   	
  
New	
  York,	
  NY	
  

	
   2/28/2014	
  	
   $	
  

	
   -‐	
   	
  $	
  

	
   55,080	
  	
   	
  $	
  

	
   805	
  	
   	
  $	
   	
   (14,230)	
   	
  $	
  

	
   273	
  	
   	
  $	
  

	
   41,928	
  	
  	
   $	
  

	
   24,924	
  	
  

	
   5/7/2014	
   	
  

	
   	
   57,889	
  	
   	
   	
  

	
   33,959	
  	
   	
   	
  

	
   8,152	
  	
   	
   	
  

	
   -‐	
   	
   	
  

	
   -‐	
   	
   	
   	
   100,000	
  	
  	
   	
  

	
   1,123	
  	
   	
   	
   	
   112,285	
  	
  	
   	
  
	
   1,396	
  	
   	
  $	
   	
   254,213	
  	
  	
   $	
  

  - 

	
   -‐	
  

	
   24,924	
  	
  

TOTAL	
  

	
   $	
  	
   103,369	
  	
   	
  $	
  

	
   149,801	
  	
   	
  $	
  

	
   13,877	
  	
   	
  $	
   	
   (14,230)	
   	
  $	
  

	
   5/27/2014	
  	
  

	
   	
   45,480	
  	
   	
   	
  

	
   60,762	
  	
   	
   	
  

	
   4,920	
  	
   	
   	
  

	
   -‐	
   	
   	
  

Acquisition-‐related	
  cost,	
  such	
  as	
  due	
  diligence,	
  legal	
  and	
  accounting	
  fees,	
  are	
  not	
  capitalized	
  or	
  applied	
  in	
  
determining	
  the	
  fair	
  value	
  of	
  the	
  above	
  acquired	
  assets.	
  During	
  the	
  year	
  ended	
  December	
  31,	
  2014,	
  we	
  paid	
  
$2,178	
  in	
  acquisition	
  costs	
  related	
  to	
  the	
  above	
  acquired	
  assets.	
   	
  

The	
  purchase	
  agreement	
  for	
  the	
  acquisition	
  of	
  the	
  Parrot	
  Key	
  Resort	
  in	
  Key	
  West,	
  FL,	
  contains	
  a	
  provision	
  that	
  
entitles	
  the	
  seller	
  to	
  additional	
  consideration	
  of	
  $2,000	
  contingent	
  upon	
  the	
  hotel	
  achieving	
  certain	
  net	
  operating	
  
income	
  thresholds	
  within	
  twelve	
  months	
  of	
  acquisition.	
  At	
  the	
  time	
  of	
  acquisition,	
  no	
  liability	
  was	
  recorded	
  as	
  the	
  
fair	
  market	
  value	
  of	
  the	
  contingent	
  consideration	
  was	
  determined	
  to	
  be	
  $0.	
  Upon	
  remeasurement	
  at	
  December	
  31,	
  
2014,	
  a	
  liability	
  was	
  recorded	
  as	
  the	
  fair	
  market	
  value	
  of	
  the	
  contingent	
  consideration	
  was	
  determined	
  to	
  be	
  
$2,000.	
  

On	
  May	
  27,	
  2014,	
  we	
  completed	
  the	
  acquisition	
  of	
  the	
  Hilton	
  Garden	
  Inn	
  52nd	
  Street	
  hotel	
  in	
  New	
  York,	
  NY	
  from	
  
an	
  unaffiliated	
  seller.	
  Previously,	
  we	
  had	
  entered	
  into	
  a	
  purchase	
  and	
  sale	
  agreement	
  to	
  acquire	
  this	
  property	
  for	
  
total	
  consideration	
  of	
  $84,000.	
  The	
  purchase	
  price	
  for	
  this	
  property	
  was	
  contractually	
  fixed	
  on	
  August	
  23,	
  2012,	
  
the	
  date	
  we	
  entered	
  into	
  the	
  purchase	
  and	
  sale	
  agreement.	
  During	
  the	
  21-‐month	
  period	
  of	
  time	
  between	
  entering	
  
in	
  the	
  purchase	
  and	
  sale	
  agreement	
  on	
  August	
  23,	
  2012	
  and	
  the	
  closing	
  date,	
  the	
  real	
  estate	
  market	
  for	
  hotels	
  
located	
  in	
  Manhattan	
  experienced	
  significant	
  price	
  appreciation	
  due	
  to	
  improved	
  economic	
  conditions	
  in	
  the	
  
market	
  and	
  in	
  the	
  overall	
  economy.	
  This	
  resulted	
  in	
  an	
  increase	
  in	
  the	
  fair	
  value	
  of	
  the	
  property	
  at	
  the	
  time	
  of	
  
closing	
  the	
  acquisition	
  and,	
  as	
  such,	
  we	
  recognized	
  a	
  gain	
  of	
  approximately	
  $13,594,	
  which	
  is	
  net	
  of	
  preopening	
  
expenses	
  of	
  $927	
  on	
  the	
  statement	
  of	
  operations,	
  as	
  the	
  fair	
  value	
  of	
  the	
  asset	
  acquired	
  less	
  any	
  liabilities	
  assumed	
  
exceeded	
  the	
  consideration	
  transferred.	
  

54 

 
 
  
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  2	
  –	
  INVESTMENT	
  IN	
  HOTEL	
  PROPERTIES	
  (CONTINUED)	
  

Consideration	
  given	
  in	
  exchange	
  for	
  the	
  property	
  included	
  $27,500	
  paid	
  in	
  cash	
  to	
  the	
  seller	
  and	
  our	
  reinstatement	
  
and	
  cancellation	
  of	
  a	
  development	
  loan	
  receivable	
  in	
  the	
  original	
  principal	
  amount	
  of	
  $10,000	
  and	
  $12,494	
  of	
  
accrued	
  interest	
  and	
  late	
  fees.	
  This	
  development	
  loan	
  receivable	
  had	
  previously	
  been	
  fully	
  impaired	
  in	
  2009,	
  but	
  
was	
  recovered	
  as	
  part	
  of	
  this	
  acquisition.	
  As	
  a	
  result,	
  we	
  recognized	
  a	
  gain	
  of	
  $22,494	
  on	
  the	
  recovery	
  of	
  the	
  
previously	
  impaired	
  development	
  loan.	
  In	
  addition,	
  we	
  paid	
  off	
  the	
  existing	
  construction	
  financing	
  and	
  entered	
  
into	
  a	
  new	
  mortgage	
  loan	
  of	
  $45,000.	
  Concurrent	
  with	
  our	
  entry	
  into	
  the	
  new	
  mortgage	
  loan,	
  we	
  entered	
  into	
  an	
  
interest	
  rate	
  cap	
  and	
  swap	
  –	
  see	
  “Note	
  7	
  –	
  Fair	
  Measurements	
  and	
  Derivative	
  Instruments”	
  for	
  more	
  information	
  
on	
  this	
  derivative.	
  No	
  other	
  consideration	
  was	
  exchanged	
  in	
  connection	
  with	
  the	
  acquisition	
  of	
  this	
  property.	
  
Below	
  is	
  a	
  tabular	
  reference	
  to	
  illustrate	
  the	
  components	
  of	
  the	
  consideration	
  and	
  fair	
  value	
  of	
  the	
  property:	
  

Hotel	
  

Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
   	
  
New	
  York,	
  NY	
  

Initial	
  
Purchase	
  
Price	
  

Interest	
  and	
  
Late	
  Fees	
  on	
  
Development	
  
Loan	
  

Non-‐Cash	
  
Fair	
  Market	
  
Value	
  Gain	
  
on	
  
Acquisition	
   	
  

Fair	
  Market	
  
Value	
  At	
  
Acquisition	
  

Franchise	
  
Fees	
  and	
  
Loan	
  Costs	
  	
   	
  

Asset	
  Value	
  
Upon	
  
Acquisition	
  

	
   Other	
  

$	
  

	
   84,000	
  	
   	
   $	
  

	
   12,494	
  	
   	
  $	
  

	
   13,594	
  	
   	
  $	
  

	
   1,074	
  	
  

	
  $	
  

	
   111,162	
  	
  	
   $	
  

	
   1,123	
  	
  	
   $	
  

	
   112,285	
  	
  

Included	
  in	
  the	
  consolidated	
  statement	
  of	
  operations	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2014	
  are	
  total	
  revenues	
  of	
  
$28,239	
  and	
  a	
  total	
  net	
  income	
  of	
  $6,219	
  for	
  hotels	
  we	
  have	
  acquired	
  and	
  consolidated	
  since	
  the	
  date	
  of	
  
acquisition.	
  These	
  amounts	
  represent	
  the	
  results	
  of	
  operations	
  for	
  these	
  hotels	
  since	
  the	
  date	
  of	
  acquisition:	
  

Year	
  Ended	
  December	
  31,	
   	
  
2014	
  

Hotel	
   	
  

Revenue	
  

Hotel	
  Milo,	
  Santa	
  Barbara,	
  CA	
  

Parrot	
  Key	
  Resort,	
  Key	
  West,	
  FL	
  

Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
  New	
  York,	
  NY	
  

Total	
  

$	
  

$	
  

	
   8,655	
  	
  

	
   $	
  

	
   9,145	
  	
  
	
   10,439	
  	
  

	
   28,239	
  	
  

	
   $	
  

Net	
   	
  
	
   Income	
   	
  

	
   668	
  	
  

	
   2,978	
  	
  
	
   2,573	
  	
  

	
   6,219	
  	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  we	
  acquired	
  the	
  following	
  wholly-‐owned	
  hotel	
  properties:	
  

Hotel	
   	
  

Hyatt	
  Union	
  Square,	
   	
  
New	
  York,	
  NY*	
  

Courtyard	
  by	
  Marriott,	
  
San	
  Diego,	
  CA	
  

Residence	
  Inn,	
   	
   	
   	
   	
  
Coconut	
  Grove,	
  FL	
  

Blue	
  Moon,	
  
Miami	
  Beach,	
  FL	
  

Winter	
  Haven,	
  
Miami	
  Beach,	
  FL	
  

Acquisition	
  
Date	
  

Land	
   	
  

Buildings	
  and	
  
Improvements	
   	
  	
  

Furniture	
  
Fixtures	
  and	
  
Equipment	
   	
  

Franchise	
  Fees	
  
and	
  Loan	
  
Costs	
  

Total	
  
Purchase	
  Price	
   	
  	
  

4/9/2013	
  

$	
  

	
   32,940	
  	
  

	
   $	
  

	
   79,300	
  	
  

	
   $	
  

	
   9,760	
  	
  

	
   $	
  

	
   1,945	
  	
  

	
   $	
  

5/30/2013	
  

	
   15,656	
  	
  

	
   51,674	
  	
  

	
   3,671	
  	
  

	
   183	
  	
  

	
   123,945	
  	
  	
  

	
   71,184	
  	
  	
  

6/12/2013	
  

	
   4,146	
  	
  

	
   17,456	
  	
  

	
   218	
  	
  

	
   75	
  	
  

	
   21,895	
  	
  	
  

12/20/2013	
   	
  

	
   4,874	
  	
  

	
   20,354	
  	
  

	
   1,125	
  	
  

12/20/2013	
   	
  

	
   5,400	
  	
  

	
   18,147	
  	
  

	
   1,050	
  	
  

	
   -‐	
  

	
   -‐	
  

Total	
  

$	
  

	
   63,016	
  	
  

	
   $	
  

	
   186,931	
  	
  

	
   $	
  

	
   15,824	
  	
  

	
   $	
  

	
   2,203	
  	
  

	
   $	
  

	
   26,353	
  	
  	
  

	
   24,597	
  	
  	
  

	
   267,974	
  	
  	
  

55 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  	
   	
  
	
  	
   	
  
	
  	
   	
   	
  
	
   	
  
	
  	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  2	
  –	
  INVESTMENT	
  IN	
  HOTEL	
  PROPERTIES	
  (CONTINUED)	
  

On	
  April	
  9,	
  2013,	
  we	
  completed	
  the	
  acquisition	
  of	
  the	
  Hyatt	
  Union	
  Square	
  hotel	
  in	
  New	
  York,	
  NY	
  from	
  

*	
  
Risingsam	
  Union	
  Square	
  LLC.	
  	
  Consideration	
  given	
  in	
  exchange	
  for	
  the	
  property	
  included	
  $36,000	
  paid	
  in	
  cash	
  to	
  
the	
  seller	
  and	
  our	
  cancellation	
  of	
  a	
  development	
  loan	
  receivable	
  in	
  the	
  original	
  principal	
  amount	
  of	
  $10,000	
  and	
  
$3,303	
  of	
  accrued	
  interest	
  on	
  the	
  loan.	
  In	
  addition,	
  we	
  paid	
  off	
  the	
  existing	
  construction	
  financing	
  and	
  entered	
  into	
  
a	
  new	
  mortgage	
  loan	
  of	
  $55,000.	
  We	
  recognized	
  a	
  net	
  gain	
  of	
  approximately	
  $12,108	
  on	
  the	
  purchase	
  of	
  the	
  Hyatt	
  
Union	
  Square	
  hotel	
  as	
  the	
  fair	
  value	
  of	
  the	
  assets	
  acquired	
  less	
  any	
  liabilities	
  assumed	
  exceeded	
  the	
  consideration	
  
transferred.	
  

During	
  the	
  year	
  ended	
  December	
  31,	
  2013,	
  we	
  paid	
  $855	
  in	
  acquisition	
  costs	
  related	
  to	
  the	
  above	
  acquired	
  assets.	
  

As	
  shown	
  in	
  the	
  table	
  below,	
  included	
  in	
  the	
  consolidated	
  statements	
  of	
  operations	
  for	
  the	
  year	
  ended	
  December	
  
31,	
  2013	
  are	
  total	
  revenues	
  of	
  $22,889	
  and	
  a	
  total	
  net	
  income	
  of	
  $1,412	
  for	
  hotels	
  we	
  have	
  acquired	
  and	
  
consolidated	
  since	
  the	
  date	
  of	
  acquisition.	
  These	
  amounts	
  represent	
  the	
  results	
  of	
  operations	
  for	
  these	
  hotels	
  since	
  
the	
  date	
  of	
  acquisition:	
  

Hotel	
   	
  

Hyatt	
  Union	
  Square,	
  New	
  York,	
  NY	
  
Courtyard	
  by	
  Marriott,	
  San	
  Diego,	
  CA	
  
Residence	
  Inn,	
  Coconut	
  Grove,	
  FL	
  
Blue	
  Moon,	
  Miami	
  Beach,	
  FL	
  
Winter	
  Haven,	
  Miami	
  Beach,	
  FL	
  

	
   $	
  

Year	
  Ended	
  December	
  31,	
   	
  
2013	
  

Revenue	
  

Net	
   	
  
(Loss)	
  Income	
  

	
   $	
  

	
   11,272	
  	
  
	
   8,350	
  	
  
	
   2,889	
  	
  
	
   175	
  	
  
	
   203	
  	
  

	
   (1,466)	
  
	
   1,914	
  	
  
	
   713	
  	
  
	
   111	
  	
  
	
   140	
  	
  

Total	
  

	
   $	
  

	
   22,889	
  	
  

	
   $	
  

	
   1,412	
  	
  

Pro	
  Forma	
  Results	
  (Unaudited)	
  

The	
  following	
  condensed	
  pro	
  forma	
  financial	
  data	
  are	
  presented	
  as	
  if	
  all	
  acquisitions	
  completed	
  since	
  January	
  1,	
  
2014	
  and	
  2013	
  had	
  been	
  completed	
  on	
  January	
  1,	
  2013	
  and	
  2012.	
  Properties	
  acquired	
  without	
  any	
  operating	
   	
  
history	
  are	
  excluded	
  from	
  the	
  condensed	
  pro	
  forma	
  operating	
  results.	
  The	
  condensed	
  pro	
  forma	
  financial	
  data	
  is	
  
not	
  necessarily	
  indicative	
  of	
  what	
  actual	
  results	
  of	
  operations	
  of	
  the	
  Company	
  would	
  have	
  been	
  assuming	
  the	
  
acquisitions	
  had	
  been	
  consummated	
  on	
  January	
  1,	
  2014	
  and	
  2013	
  at	
  the	
  beginning	
  of	
  the	
  year	
  presented,	
  nor	
  do	
  
they	
  purport	
  to	
  represent	
  the	
  results	
  of	
  operations	
  for	
  future	
  periods.	
  

Pro	
  Forma	
  Total	
  Revenues	
  

Pro	
  Forma	
  Income	
  from	
  Continuing	
  Operations	
   	
  

(Loss)	
  from	
  Discontinued	
  Operations	
  

Pro	
  Forma	
  Net	
  Income	
  
Income	
  (Loss)	
  Allocated	
  to	
  Noncontrolling	
  Interest	
  

Preferred	
  Distributions	
  

Extinguishment	
  of	
  Issuance	
  Costs	
  Upon	
  Redemption	
  of	
  Series	
  A	
  Preferred	
  Shares	
  

Pro	
  Forma	
  Net	
  Income	
  (Loss)	
  Applicable	
  to	
  Common	
  Shareholders	
  

Pro	
  Forma	
  Income	
  Applicable	
  to	
  Common	
  Shareholders	
  per	
  Common	
  Share	
  

Basic	
  
Diluted	
  

Weighted	
  Average	
  Common	
  Shares	
  Outstanding	
  

Basic	
   	
  
Diluted	
  

56 

	
   $	
  

	
   $	
  

	
   $	
  

$	
  
$	
  

Year	
  Ended	
  December	
  31,	
   	
  

2014	
  

2013	
  

	
   425,029	
  	
  

	
   $	
  

	
   376,767	
  	
  

	
   72,864	
  	
  
	
   (1,665)	
  
	
   71,199	
  	
  
	
   (1,016)	
  
	
   (14,356)	
  

	
   -‐	
  
	
   55,827	
  	
  

	
   $	
  

	
   $	
  

	
   0.28	
  	
  
	
   0.28	
  	
  

	
   $	
  
	
   $	
  

	
   27,859	
  	
  
	
   29,195	
  	
  
	
   57,054	
  	
  
	
   (335)	
  
	
   (14,611)	
  

	
   (2,250)	
  
	
   39,858	
  	
  

	
   0.20	
  	
  
	
   0.20	
  	
  

	
   199,109,209	
  	
  
	
   201,197,310	
  	
  

	
   198,390,450	
  	
  
	
   201,918,177	
  	
  

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  2	
  –	
  INVESTMENT	
  IN	
  HOTEL	
  PROPERTIES	
  (CONTINUED)	
  

Asset	
  Development	
  and	
  Renovation	
  

The	
  Company	
  has	
  opportunistically	
  engaged	
  in	
  the	
  development	
  of	
  hotel	
  assets.	
  On	
  July	
  22,	
  2011,	
  the	
  Company	
  
completed	
  the	
  acquisition	
  of	
  the	
  real	
  property	
  and	
  improvements	
  located	
  at	
  32	
  Pearl	
  Street,	
  New	
  York,	
  NY,	
  from	
  
an	
  unaffiliated	
  seller	
  for	
  a	
  total	
  purchase	
  price	
  of	
  $28,300.	
  On	
  June	
  23,	
  2014,	
  this	
  property	
  opened	
  as	
  a	
  Hampton	
  
Inn.	
  The	
  total	
  construction	
  costs	
  spent	
  on	
  this	
  property	
  since	
  acquisition	
  were	
  $9,564,	
  which	
  equates	
  to	
  a	
  total	
  
carrying	
  value	
  of	
  approximately	
  $37,864	
  when	
  the	
  property	
  opened.	
  

In	
  January	
  2014,	
  the	
  Company	
  completed	
  the	
  construction	
  of	
  an	
  additional	
  oceanfront	
  tower,	
  additional	
  meeting	
  
space	
  and	
  structured	
  parking	
  on	
  a	
  land	
  parcel	
  adjacent	
  to	
  the	
  Courtyard	
  by	
  Marriott,	
  Miami,	
  FL,	
  a	
  hotel	
  acquired	
  
on	
  November	
  16,	
  2011.	
  This	
  land	
  parcel	
  was	
  included	
  in	
  the	
  acquisition	
  of	
  the	
  hotel.	
  

We	
  capitalize	
  expenditures	
  related	
  to	
  hotel	
  development	
  projects	
  and	
  renovations,	
  including	
  indirect	
  costs	
  such	
  as	
  
interest	
  expense,	
  real	
  estate	
  taxes	
  and	
  utilities	
  related	
  to	
  hotel	
  development	
  projects	
  and	
  renovations.	
  

We	
  have	
  capitalized	
  the	
  following	
  indirect	
  development	
  costs	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013	
  and	
  
2012:	
  

2014	
  

Year	
  Ended	
  December	
  31,	
   	
  
2013	
  

2012	
  

Property	
  Tax	
  
Interest	
  Expense	
  
Utilities	
  
Total	
  

	
   $	
  

	
   $	
  

	
   223	
  
	
   458	
  
	
   73	
  
	
   754	
  

	
   $	
  

	
   $	
  

	
   388	
  
	
   1,320	
  
	
   3	
  
	
   1,711	
  

	
   $	
  

	
   $	
  

	
   296	
  
	
   1,542	
  
	
   9	
  
	
   1,847	
  

During	
  the	
  second	
  quarter	
  of	
  2014,	
  we	
  finalized	
  our	
  settlement	
  of	
  the	
  insurance	
  claim	
  we	
  had	
  for	
  losses	
  incurred	
  
as	
  a	
  result	
  of	
  Hurricane	
  Sandy.	
  In	
  October	
  2012,	
  Hurricane	
  Sandy	
  affected	
  numerous	
  hotels	
  within	
  our	
  portfolio.	
  
Two	
  hotels	
  within	
  our	
  portfolio	
  were	
  significantly	
  impacted	
  by	
  this	
  natural	
  disaster;	
  one	
  hotel	
  was	
  inoperable	
  
(Holiday	
  Inn	
  Express	
  Water	
  Street,	
  New	
  York,	
  NY)	
  and	
  one	
  hotel	
  development	
  project,	
  which	
  was	
  subsequently	
  
completed	
  on	
  June	
  23,	
  2014,	
  incurred	
  delays	
  in	
  construction	
  (Hampton	
  Inn,	
  Pearl	
  Street,	
  New	
  York,	
  NY).	
  Prior	
  to	
  
March	
  31,	
  2014,	
  we	
  had	
  recorded	
  estimated	
  property	
  losses	
  of	
  $1,586	
  on	
  the	
  Holiday	
  Inn	
  Express	
  Water	
  Street	
  and	
  
a	
  corresponding	
  insurance	
  claim	
  receivable	
  of	
  $1,486.	
  This	
  hotel	
  reopened	
  in	
  April	
  2013.	
  We	
  also	
  had	
  recorded	
  
estimated	
  property	
  losses	
  of	
  $1,997	
  on	
  the	
  Hampton	
  Inn	
  Pearl	
  Street	
  and	
  a	
  corresponding	
  insurance	
  claim	
  
receivable	
  of	
  $1,897.	
  This	
  hotel	
  opened	
  in	
  June	
  2014.	
  As	
  a	
  result	
  of	
  the	
  claim	
  settlement,	
  we	
  recorded	
  a	
  gain	
  on	
  
insurance	
  settlements	
  of	
  approximately	
  $4,604,	
  which	
  included	
  business	
  interruption	
  claims.	
  

57 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  3	
  –	
  INVESTMENT	
  IN	
  UNCONSOLIDATED	
  JOINT	
  VENTURES	
  

As	
  of	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  our	
  investment	
  in	
  unconsolidated	
  joint	
  ventures	
  consisted	
  of	
  the	
  
following:	
  

Joint	
  Venture	
  

Hotel	
  Properties	
  

	
   Owned	
  

Return	
  

2014	
  

2013	
  

Percent	
   	
   	
  

Preferred	
  

	
   	
   December	
  31,	
   	
   	
   	
   December	
  31,	
   	
  

SB	
  Partners,	
  LLC	
  

Holiday	
  Inn	
  Express,	
  South	
  Boston,	
  
MA	
  

Hiren	
  Boston,	
  LLC	
  

Courtyard	
  by	
  Marriott,	
  South	
  
Boston,	
  MA	
  

50.0%	
  	
  

N/A	
  

$	
  

	
   913	
  	
  

$	
  

	
   1,057	
  	
  

50.0%	
  	
  

N/A	
  

	
   4,680	
  	
  

	
   4,777	
  	
  

Mystic	
  Partners,	
  
LLC	
  

Hilton	
  and	
  Marriott	
  branded	
  hotels	
  
in	
  CT	
  

	
   8.8%-‐66.7%	
   	
  

8.5%	
  
non-‐cumulative	
  

	
  	
   $	
  

	
   5,556	
  	
  
	
   11,150	
  	
  	
   $	
  

	
   6,210	
  	
  

	
   12,044	
  	
  

In	
  2013,	
  we	
  recorded	
  an	
  impairment	
  loss	
  of	
  $1,813	
  related	
  to	
  the	
  Courtyard,	
  Norwich,	
  CT,	
  one	
  of	
  the	
  properties	
  
owned	
  by	
  Mystic	
  Partners,	
  LLC.	
  	
  Mystic	
  Partners,	
  LLC	
  transferred	
  the	
  title	
  to	
  the	
  property	
  to	
  the	
  lender	
  during	
  the	
  
year	
  ended	
  December	
  31,	
  2014.	
  	
  As	
  we	
  did	
  not	
  anticipate	
  recovering	
  our	
  investment	
  balance	
  in	
  this	
  asset,	
  we	
  
reduced	
  the	
  portion	
  of	
  our	
  Mystic	
  Partners,	
  LLC	
  investment	
  related	
  to	
  this	
  property	
  to	
  $0	
  as	
  of	
  December	
  31,	
  
2013.	
  	
  

On	
  February	
  1,	
  2013,	
  the	
  Company	
  closed	
  on	
  the	
  sale	
  of	
  its	
  interest	
  in	
  one	
  of	
  the	
  unconsolidated	
  joint	
  venture	
  
properties	
  owned	
  in	
  part	
  by	
  Mystic	
  Partners,	
  LLC	
  to	
  its	
  joint	
  venture	
  partner.	
  As	
  our	
  investment	
  in	
  this	
  
unconsolidated	
  joint	
  venture	
  equated	
  the	
  net	
  proceeds	
  distributed	
  to	
  us,	
  we	
  did	
  not	
  record	
  a	
  gain	
  or	
  loss	
  in	
  
connection	
  with	
  the	
  sale	
  of	
  this	
  hotel.	
  

As	
  noted	
  in	
  “Note	
  2	
  –	
  Investment	
  in	
  Hotel	
  Properties,”	
  on	
  August	
  13,	
  2012,	
  the	
  Company	
  purchased	
  the	
  remaining	
  
50%	
  ownership	
  interest	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing,	
  the	
  lessee	
  of	
  the	
  Courtyard	
  by	
  Marriot,	
  Ewing,	
  NJ.	
  As	
  
such,	
  we	
  ceased	
  to	
  account	
  for	
  our	
  investment	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing	
  under	
  the	
  equity	
  method	
  of	
  
accounting	
  as	
  of	
  August	
  13,	
  2012	
  because	
  it	
  became	
  a	
  consolidated	
  subsidiary.	
  Our	
  interest	
  in	
  Inn	
  America	
  
Hospitality	
  at	
  Ewing,	
  which	
  consisted	
  of	
  our	
  investment	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing	
  and	
  a	
  receivable,	
  was	
  
remeasured	
  and	
  as	
  a	
  result	
  based	
  on	
  the	
  appraised	
  value	
  of	
  the	
  hotel,	
  we	
  recorded	
  a	
  loss	
  of	
  approximately	
  $1,668	
  
during	
  the	
  twelve	
  months	
  ended	
  December	
  31,	
  2012.	
  

As	
  noted	
  in	
  “Note	
  2	
  –	
  Investment	
  in	
  Hotel	
  Properties,”	
  on	
  June	
  18,	
  2012,	
  the	
  Company	
  purchased	
  the	
  remaining	
  
50%	
  ownership	
  interest	
  in	
  Metro	
  29th,	
  the	
  lessee	
  of	
  the	
  Holiday	
  Inn	
  Express,	
  Manhattan,	
  New	
  York,	
  NY.	
  As	
  such,	
  
we	
  ceased	
  to	
  account	
  for	
  our	
  investment	
  in	
  Metro	
  29th	
  under	
  the	
  equity	
  method	
  of	
  accounting	
  as	
  of	
  June	
  18,	
  2012	
  
because	
  it	
  became	
  a	
  consolidated	
  subsidiary.	
  Our	
  interest	
  in	
  Metro	
  29th	
  was	
  remeasured,	
  and	
  as	
  a	
  result,	
  we	
  
recorded	
  a	
  loss	
  of	
  approximately	
  $224.	
  

Fair	
  value	
  for	
  our	
  previously	
  held	
  investments	
  in	
  Inn	
  America	
  Hospitality	
  at	
  Ewing	
  and	
  Metro	
  29th	
  was	
  determined	
  
through	
  the	
  use	
  of	
  an	
  income	
  approach	
  and	
  was	
  measured	
  using	
  Level	
  3	
  inputs.	
  The	
  income	
  approach	
  estimates	
  an	
  
income	
  stream	
  for	
  a	
  hotel	
  property	
  (typically	
  5	
  years)	
  and	
  discounts	
  this	
  income	
  plus	
  a	
  reversion	
  (presumed	
  sale)	
  
into	
  a	
  present	
  value	
  at	
  a	
  risk	
  adjusted	
  rate.	
  RevPAR	
  growth	
  assumptions	
  utilized	
  in	
  this	
  approach	
  are	
  derived	
  from	
  
market	
  transactions	
  as	
  well	
  as	
  other	
  financial	
  and	
  industry	
  data.	
  The	
  terminal	
  cap	
  rate	
  and	
  discount	
  rate	
  are	
  
significant	
  inputs	
  to	
  this	
  valuation.	
  The	
  fair	
  value	
  measurements	
  determined	
  during	
  the	
  year	
  included	
  RevPAR	
  
growth	
  assumptions	
  ranging	
  between	
  3%	
  and	
  8%,	
  terminal	
  cap	
  rates	
  ranging	
  between	
  8.5%	
  and	
  9.5%,	
  and	
  a	
  
discount	
  rate	
  of	
  10.5%.	
  Changes	
  in	
  these	
  inputs	
  could	
  result	
  in	
  a	
  significant	
  change	
  in	
  the	
  valuation	
  of	
  our	
  original	
  
joint	
  venture	
  investments	
  and	
  a	
  change	
  in	
  the	
  loss	
  from	
  remeasurement	
  of	
  investment	
  in	
  unconsolidated	
  joint	
  
venture	
  recognized	
  during	
  the	
  period.	
  

58 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  3	
  –	
  INVESTMENT	
  IN	
  UNCONSOLIDATED	
  JOINT	
  VENTURES	
  (CONTINUED)	
  

On	
  February	
  23,	
  2012,	
  the	
  Company	
  closed	
  on	
  the	
  sale	
  of	
  14	
  non-‐core	
  hotel	
  properties,	
  including	
  three	
  of	
  the	
  
unconsolidated	
  joint	
  venture	
  hotel	
  properties.	
  On	
  May	
  8,	
  2012,	
  the	
  Company	
  closed	
  on	
  the	
  remaining	
  four	
  
non-‐core	
  hotel	
  properties,	
  including	
  one	
  of	
  the	
  unconsolidated	
  joint	
  venture	
  hotel	
  properties.	
  As	
  our	
  investment	
  in	
  
these	
  unconsolidated	
  joint	
  ventures	
  equated	
  the	
  net	
  proceeds	
  distributed	
  to	
  us,	
  we	
  did	
  not	
  record	
  a	
  gain	
  or	
  loss	
  in	
  
connection	
  with	
  the	
  sale	
  of	
  these	
  hotel	
  properties.	
  See	
  “Note	
  11	
  –	
  Hotel	
  Dispositions”	
  for	
  more	
  information.	
  

Income	
  or	
  loss	
  from	
  our	
  unconsolidated	
  joint	
  ventures	
  is	
  allocated	
  to	
  us	
  and	
  our	
  joint	
  venture	
  partners	
  consistent	
  
with	
  the	
  allocation	
  of	
  cash	
  distributions	
  in	
  accordance	
  with	
  the	
  joint	
  venture	
  agreements.	
  Any	
  difference	
  between	
  
the	
  carrying	
  amount	
  of	
  these	
  investments	
  and	
  the	
  underlying	
  equity	
  in	
  net	
  assets	
  is	
  amortized	
  over	
  the	
  expected	
  
useful	
  lives	
  of	
  the	
  properties	
  and	
  other	
  intangible	
  assets.	
  

Income	
  (loss)	
  recognized	
  during	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  for	
  our	
  investments	
  in	
  
unconsolidated	
  joint	
  ventures	
  is	
  as	
  follows:	
  

SB	
  Partners,	
  LLC	
  
Hiren	
  Boston,	
  LLC	
  
Mystic	
  Partners,	
  LLC	
  
Metro	
  29th	
  Street	
  Associates,	
  LLC	
  

	
  $	
  

Income	
  (Loss)	
  from	
  Unconsolidated	
  Joint	
  
Venture	
  Investments	
  
Impairment	
  from	
  Unconsolidated	
  Joint	
  
Ventures	
  
Loss	
  from	
  Remeasurement	
  of	
  Investment	
  in	
  
Unconsolidated	
  Joint	
  Ventures	
  
Income	
  (Loss)	
  from	
  Unconsolidated	
  Joint	
  
Venture	
  Investments	
  

2014	
  

Year	
  Ended	
  December	
  31,	
   	
  
2013	
  

2012	
  

	
   407	
   	
  $	
  
	
   603	
   	
   	
  
	
   (317)	
   	
   	
  
	
   -‐	
   	
   	
  

	
   264	
   	
  $	
  
	
   113	
   	
  	
  
	
   (399)	
   	
   	
  
	
   -‐	
   	
   	
  

	
   693	
   	
   	
  

	
   (22)	
   	
  	
  

85	
  
	
   230	
  
	
   (433)	
  
	
   (114)	
  

	
   (232)	
  

	
   -‐	
  

	
   (1,813)	
   	
  	
  

	
   -‐	
   	
   	
  

	
   -‐	
   	
   	
  

	
   -‐	
   	
  	
  

	
   (1,892)	
  

	
  $	
  

	
   693	
   	
  $	
  

	
   (1,835)	
   	
  $	
  

	
   (2,124)	
  

The	
  Mystic	
  Partners,	
  LLC	
  joint	
  venture	
  agreement	
  provides	
  for	
  an	
  8.5%	
  non-‐cumulative	
  preferred	
  return	
  based	
  on	
  
our	
  contributed	
  equity	
  interest	
  in	
  the	
  venture.	
  Cash	
  distributions	
  will	
  be	
  made	
  from	
  cash	
  available	
  for	
  distribution,	
  
first,	
  to	
  us	
  to	
  provide	
  an	
  8.5%	
  annual	
  non-‐compounded	
  return	
  on	
  our	
  unreturned	
  capital	
  contributions	
  and	
  then	
  to	
  
our	
  joint	
  venture	
  partner	
  to	
  provide	
  an	
  8.5%	
  annual	
  non-‐compounded	
  return	
  of	
  their	
  unreturned	
  contributions.	
  
Any	
  remaining	
  cash	
  available	
  for	
  distribution	
  will	
  be	
  distributed	
  to	
  us	
  10.5%	
  with	
  respect	
  to	
  the	
  net	
  cash	
  flow	
  from	
  
the	
  Hartford	
  Marriott,	
  7.0%	
  with	
  respect	
  to	
  the	
  Hartford	
  Hilton	
  and	
  56.7%,	
  with	
  respect	
  to	
  the	
  remaining	
  property.	
  
Mystic	
  Partners,	
  LLC	
  allocates	
  income	
  to	
  us	
  and	
  our	
  joint	
  venture	
  partner	
  consistent	
  with	
  the	
  allocation	
  of	
  cash	
  
distributions	
  in	
  accordance	
  with	
  the	
  joint	
  venture	
  agreements.	
  

Each	
  of	
  the	
  Mystic	
  Partners,	
  LLC	
  hotel	
  properties,	
  except	
  the	
  Hartford	
  Hilton,	
  is	
  under	
  an	
  Asset	
  Management	
  
Agreement	
  with	
  44	
  New	
  England	
  to	
  provide	
  asset	
  management	
  services.	
  Fees	
  for	
  these	
  services	
  are	
  paid	
  monthly	
  
to	
  44	
  New	
  England	
  and	
  recognized	
  as	
  income	
  in	
  the	
  amount	
  of	
  1%	
  of	
  operating	
  revenues,	
  except	
  for	
  the	
  Hartford	
  
Marriott	
  which	
  is	
  0.25%	
  of	
  operating	
  revenues.	
  

The	
  Company	
  and	
  our	
  joint	
  venture	
  partner	
  in	
  Mystic	
  Partners,	
  LLC	
  jointly	
  and	
  severally	
  guarantee	
  the	
  performance	
  
of	
  the	
  terms	
  of	
  a	
  loan	
  to	
  Adriaen’s	
  Landing	
  Hotel,	
  LLC,	
  owner	
  of	
  the	
  Hartford	
  Marriott,	
  in	
  the	
  amount	
  of	
  $50,000,	
  
and	
  315	
  Trumbull	
  Street	
  Associates,	
  LLC,	
  owner	
  of	
  the	
  Hartford	
  Hilton,	
  in	
  the	
  amount	
  of	
  $27,000,	
  if	
  at	
  any	
  time	
  
during	
  the	
  term	
  of	
  the	
  note	
  and	
  during	
  such	
  time	
  as	
  the	
  net	
  worth	
  of	
  Mystic	
  Partners	
  falls	
  below	
  the	
  amount	
  of	
  the	
  
guarantee.	
  We	
  have	
  determined	
  that	
  the	
  probability	
  of	
  incurring	
  loss	
  under	
  this	
  guarantee	
  is	
  remote	
  and	
  the	
  value	
  
attributed	
  to	
  the	
  guarantee	
  is	
  de	
  minimis.	
  

59 

	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  3	
  –	
  INVESTMENT	
  IN	
  UNCONSOLIDATED	
  JOINT	
  VENTURES	
  (CONTINUED)	
  

The	
  following	
  tables	
  set	
  forth	
  the	
  total	
  assets,	
  liabilities,	
  equity	
  and	
  components	
  of	
  net	
  income	
  or	
  loss,	
  including	
  
the	
  Company’s	
  share,	
  related	
  to	
  the	
  unconsolidated	
  joint	
  ventures	
  discussed	
  above	
  as	
  of	
  December	
  31,	
  2014	
  and	
  
December	
  31,	
  2013	
  and	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012.	
   	
  

Balance	
  Sheets	
  

Assets	
  

Investment	
  in	
  Hotel	
  Properties,	
  Net	
  
Other	
  Assets	
  
Total	
  Assets	
  

Liabilities	
  and	
  Equity	
  

Mortgages	
  and	
  Notes	
  Payable	
  
Other	
  Liabilities	
  
Equity:	
  

Hersha	
  Hospitality	
  Trust	
  
Joint	
  Venture	
  Partner(s)	
  

Total	
  Equity	
  

December	
  31,	
   	
  
2014	
  

December	
  31,	
   	
  
2013	
  

	
  $	
  

	
  $	
  

	
  $	
  

	
   106,430	
   	
  $	
  
	
   19,032	
   	
   	
  
	
   125,462	
   	
  $	
  

	
   115,446	
   	
  $	
  
	
   30,832	
   	
   	
  

	
   23,060	
   	
   	
  
	
   (43,876)	
   	
   	
  
	
   (20,816)	
   	
   	
  

	
   114,221	
  
	
   19,146	
  
	
   133,367	
  

	
   112,654	
  
	
   37,464	
  

	
   26,230	
  
	
   (42,981)	
  
	
   (16,751)	
  

Total	
  Liabilities	
  and	
  Equity	
  

	
  $	
  

	
   125,462	
   	
  $	
  

	
   133,367	
  

Statements	
  of	
  Operations	
  

Room	
  Revenue	
  
Other	
  Revenue	
  
Operating	
  Expenses	
  
Lease	
  Expense	
  
Property	
  Taxes	
  and	
  Insurance	
  
General	
  and	
  Administrative	
  
Depreciation	
  and	
  Amortization	
  
Interest	
  Expense	
  
Debt	
  Extinguishment	
  and	
  Gain	
  on	
  Debt	
  
Forgiveness	
  
Gain	
  (Loss)	
  allocated	
  to	
  Noncontrolling	
  
Interests	
  

Net	
  Income	
  from	
  Continuing	
  Operations	
  

(Loss)	
  Income	
  from	
  Discontinued	
  
Operations	
  
Gain	
  on	
  Disposition	
  of	
  Hotel	
  Properties	
  

	
  $	
  

2014	
  

Year	
  Ended	
  December	
  31,	
   	
  
2013	
  

2012	
  

	
   59,135	
   	
  $	
  
	
   21,725	
   	
   	
  
	
   (54,831)	
   	
   	
  
	
   (1,063)	
   	
   	
  
	
   (2,934)	
   	
   	
  
	
   (5,783)	
   	
   	
  
	
   (6,376)	
   	
   	
  
	
   (11,995)	
   	
   	
  

	
   58,273	
   	
  $	
  
	
   22,606	
   	
  	
  
	
   (55,179)	
   	
  	
  
	
   (996)	
   	
  	
  
	
   (3,034)	
   	
  	
  
	
   (5,794)	
   	
  	
  
	
   (6,697)	
   	
  	
  
	
   (7,526)	
   	
  	
  

	
   62,058	
  
	
   22,306	
  
	
   (57,131)	
  
	
   (3,729)	
  
	
   (3,438)	
  
	
   (5,904)	
  
	
   (6,533)	
  
	
   (7,650)	
  

	
   3,016	
   	
   	
  

	
   -‐	
   	
  	
  

	
   -‐	
  

	
   115	
   	
   	
  

	
   (179)	
   	
  	
  

	
   (2,614)	
  

	
   1,009	
   	
   	
  

	
   1,474	
   	
  	
  

	
   (2,635)	
  

	
   -‐	
   	
   	
  
	
   -‐	
   	
   	
  

	
   (55)	
   	
  	
  
	
   1,161	
   	
  	
  

	
   121	
  
	
   25,131	
  

	
   	
   	
   Net	
  Income	
   	
  

	
  $	
  

	
   1,009	
   	
  $	
  

	
   2,580	
   	
  $	
  

	
   22,617	
  

60 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
   	
  	
  
	
   	
  	
  
	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
   	
   	
  
	
   	
  	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
   	
   	
  
	
   	
  	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  3	
  –	
  INVESTMENT	
  IN	
  UNCONSOLIDATED	
  JOINT	
  VENTURES	
  (CONTINUED)	
  

The	
  following	
  table	
  is	
  a	
  reconciliation	
  of	
  the	
  Company’s	
  share	
  in	
  the	
  unconsolidated	
  joint	
  ventures’	
  equity	
  to	
  the	
  
Company’s	
  investment	
  in	
  the	
  unconsolidated	
  joint	
  ventures	
  as	
  presented	
  on	
  the	
  Company’s	
  balance	
  sheets	
  as	
  of	
  
December	
  31,	
  2014	
  and	
  December	
  31,	
  2013.	
  

Company's	
  share	
  of	
  equity	
  recorded	
  on	
  the	
  joint	
  ventures'	
  
financial	
  statements	
  

	
  $	
  

Adjustment	
  to	
  reconcile	
  the	
  Company's	
  share	
  of	
  equity	
  
recorded	
  on	
  the	
  joint	
  ventures'	
  financial	
  statements	
  to	
  our	
  
investment	
  in	
  unconsolidated	
  joint	
  ventures(1)	
  

December	
  31,	
   	
  
2014	
  

December	
  31,	
   	
  
2013	
  

	
   23,060	
   	
  $	
  

	
   26,230	
  

	
   (11,910)	
   	
   	
  

	
   (14,186)	
  

	
   12,044	
  

Investment	
  in	
  Unconsolidated	
  Joint	
  Ventures	
   	
  

	
  $	
  

	
   11,150	
   	
  $	
  

(1)	
  	
  	
  

Adjustment	
  to	
  reconcile	
  the	
  Company's	
  share	
  of	
  equity	
  recorded	
  on	
  the	
  joint	
  ventures'	
  financial	
  
statements	
  to	
  our	
  investment	
  in	
  unconsolidated	
  joint	
  ventures	
  consists	
  of	
  the	
  following:	
  

• 

• 

• 

cumulative	
  impairment	
  of	
  the	
  Company’s	
  investment	
  in	
  joint	
  ventures	
  not	
  reflected	
  on	
  the	
  joint	
  ventures'	
  
financial	
  statements;	
  
the	
  Company’s	
  basis	
  in	
  the	
  investment	
  in	
  joint	
  ventures	
  not	
  recorded	
  on	
  the	
  joint	
  ventures'	
  financial	
  
statements;	
  and	
  
accumulated	
  amortization	
  of	
  the	
  Company’s	
  equity	
  in	
  joint	
  ventures	
  that	
  reflects	
  the	
  Company’s	
  portion	
  
of	
  the	
  excess	
  of	
  the	
  fair	
  value	
  of	
  joint	
  ventures'	
  assets	
  on	
  the	
  date	
  of	
  our	
  investment	
  over	
  the	
  carrying	
  
value	
  of	
  the	
  assets	
  recorded	
  on	
  the	
  joint	
  ventures	
  financial	
  statements	
  (this	
  excess	
  investment	
  is	
  
amortized	
  over	
  the	
  life	
  of	
  the	
  properties,	
  and	
  the	
  amortization	
  is	
  included	
  in	
  Income	
  (Loss)	
  from	
  
Unconsolidated	
  Joint	
  Venture	
  Investments	
  on	
  the	
  Company’s	
  consolidated	
  statement	
  of	
  operations).	
  

61 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
  
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  4	
  –	
  OTHER	
  ASSETS	
  AND	
  DEPOSITS	
  ON	
  HOTEL	
  ACQUISITIONS	
  

Other	
  Assets	
  

Other	
  Assets	
  consisted	
  of	
  the	
  following	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013:	
  

Transaction	
  Costs	
  
Investment	
  in	
  Statutory	
  Trusts	
  
Prepaid	
  Expenses	
  
Insurance	
  Claims	
  Receivable	
  
Deferred	
  Tax	
  Asset,	
  Net	
  of	
  Valuation	
  Allowance	
  of	
  $804	
  
Other	
  

	
   December	
  31,	
  
2014	
  

	
   December	
  31,	
  
2013	
  

	
   $	
  

	
   $	
  

	
   -‐	
  
	
   1,548	
  
	
   7,883	
  
	
   64	
  
	
   11,448	
  
	
   7,483	
  
	
   28,426	
  

	
   $	
  

	
   $	
  

	
   115	
  
	
   1,548	
  
	
   9,256	
  
	
   1,706	
  
	
   8,766	
  
	
   6,069	
  
	
   27,460	
  

Transaction	
  Costs	
  -‐	
  Transaction	
  costs	
  include	
  legal	
  fees	
  and	
  other	
  third	
  party	
  transaction	
  costs	
  incurred	
  relative	
  to	
  
entering	
  into	
  debt	
  facilities,	
  issuances	
  of	
  equity	
  securities,	
  and	
  other	
  costs	
  which	
  are	
  recorded	
  in	
  other	
  assets	
  prior	
  
to	
  the	
  closing	
  of	
  the	
  respective	
  transactions.	
  

Investment	
  in	
  Statutory	
  Trusts	
  -‐	
  We	
  have	
  an	
  investment	
  in	
  the	
  common	
  stock	
  of	
  Hersha	
  Statutory	
  Trust	
  I	
  and	
  
Hersha	
  Statutory	
  Trust	
  II.	
  Our	
  investment	
  is	
  accounted	
  for	
  under	
  the	
  equity	
  method.	
  

Prepaid	
  Expenses	
  -‐	
  Prepaid	
  expenses	
  include	
  amounts	
  paid	
  for	
  property	
  tax,	
  insurance	
  and	
  other	
  expenditures	
  that	
  
will	
  be	
  expensed	
  in	
  the	
  next	
  twelve	
  months.	
  

Insurance	
  Claims	
  Receivable	
  –	
  As	
  noted	
  in	
  “Note	
  2	
  –	
  Investment	
  in	
  Hotel	
  Properties,”	
  we	
  recorded	
  an	
  insurance	
  
claim	
  receivable	
  due	
  to	
  the	
  property	
  damage	
  that	
  occurred	
  at	
  several	
  of	
  our	
  hotel	
  properties	
  as	
  a	
  result	
  of	
  
Hurricane	
  Sandy	
  in	
  October	
  2012.	
   	
   This	
  claim	
  was	
  settled	
  in	
  June	
  2014,	
  and	
  we	
  received	
  our	
  final	
  claim	
  payment	
  
in	
  July	
  2014	
  in	
  the	
  amount	
  of	
  $2,498.	
  The	
  remaining	
  balance	
  in	
  insurance	
  claims	
  receivable	
  as	
  of	
  December	
  31,	
  
2014	
  is	
  comprised	
  of	
  claims	
  that	
  arose	
  from	
  property	
  damage	
  at	
  hotel	
  properties	
  as	
  a	
  result	
  of	
  other	
  events.	
  

Deferred	
  Tax	
  Asset	
  -‐	
  We	
  have	
  approximately	
  $11,448	
  of	
  net	
  deferred	
  tax	
  assets	
  as	
  of	
  December	
  31,	
  2014.	
  We	
  have	
  
considered	
  various	
  factors,	
  including	
  future	
  reversals	
  of	
  existing	
  taxable	
  temporary	
  differences,	
  future	
  projected	
  
taxable	
  income	
  and	
  tax	
  planning	
  strategies	
  in	
  determining	
  a	
  valuation	
  allowance	
  for	
  our	
  deferred	
  tax	
  assets,	
  and	
  
we	
  believe	
  that	
  it	
  is	
  more	
  likely	
  than	
  not	
  that	
  we	
  will	
  be	
  able	
  to	
  realize	
  the	
  $11,448	
  of	
  net	
  deferred	
  tax	
  assets	
  in	
  the	
  
future.	
  

Deposits	
  on	
  Hotel	
  Acquisitions	
  

As	
  of	
  December	
  31,	
  2014,	
  we	
  had	
  no	
  deposits	
  on	
  hotel	
  acquisitions.	
  As	
  of	
  December	
  31,	
  2013,	
  deposits	
  on	
  hotel	
  
acquisitions	
  consisted	
  of	
  $15,486	
  in	
  interest	
  bearing	
  deposits	
  related	
  to	
  the	
  acquisition	
  of	
  the	
  Hilton	
  Garden	
  Inn	
  
52nd	
  Street,	
  New	
  York,	
  NY	
  and	
  $3,100	
  in	
  non-‐interest	
  bearing	
  deposits	
  related	
  to	
  the	
  acquisition	
  of	
  the	
  Hotel	
  Milo,	
  
located	
  in	
  Santa	
  Barbara,	
  California.	
  The	
  acquisition	
  of	
  the	
  Hotel	
  Milo	
  closed	
  in	
  the	
  first	
  quarter	
  and	
  the	
  Hilton	
  
Garden	
  Inn	
  52nd	
  Street	
  closed	
  in	
  the	
  second	
  quarter	
  of	
  2014.	
  See	
  “Note	
  2	
  –	
  Investment	
  In	
  Hotel	
  Properties”	
  for	
  
more	
  information.	
  

62 

	
  
	
  
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
 
	
  
	
  
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  5	
  –	
  DEBT	
  

Mortgages	
  

We	
  had	
  total	
  mortgages	
  payable	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  of	
  $617,375	
  and	
  $617,788	
  
(including	
  $45,835	
  in	
  outstanding	
  mortgage	
  indebtedness	
  related	
  to	
  assets	
  held	
  for	
  sale	
  at	
  December	
  31,	
  2013),	
  
respectively.	
  These	
  balances	
  consisted	
  of	
  mortgages	
  with	
  fixed	
  and	
  variable	
  interest	
  rates,	
  which	
  ranged	
  from	
  
2.47%	
  to	
  6.50%	
  as	
  of	
  December	
  31,	
  2014.	
  Included	
  in	
  these	
  balances	
  are	
  net	
  premiums	
  of	
  $1,584	
  and	
  $2,466	
  as	
  of	
  
December	
  31,	
  2014	
  and	
  December	
  31,	
  2013,	
  respectively,	
  which	
  are	
  amortized	
  over	
  the	
  remaining	
  life	
  of	
  the	
  loans.	
  
Aggregate	
  interest	
  expense	
  incurred	
  under	
  the	
  mortgage	
  loans	
  payable	
  totaled	
  $31,046,	
  $34,854,	
  and	
  $38,343	
  
during	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  

Our	
  mortgage	
  indebtedness	
  contains	
  various	
  financial	
  and	
  non-‐financial	
  covenants	
  customarily	
  found	
  in	
  secured,	
  
non-‐recourse	
  financing	
  arrangements.	
  Our	
  mortgage	
  loans	
  payable	
  typically	
  require	
  that	
  specified	
  debt	
  service	
  
coverage	
  ratios	
  be	
  maintained	
  with	
  respect	
  to	
  the	
  financed	
  properties	
  before	
  we	
  can	
  exercise	
  certain	
  rights	
  under	
  
the	
  loan	
  agreements	
  relating	
  to	
  such	
  properties.	
  If	
  the	
  specified	
  criteria	
  are	
  not	
  satisfied,	
  the	
  lender	
  may	
  be	
  able	
  to	
  
escrow	
  cash	
  flow	
  generated	
  by	
  the	
  property	
  securing	
  the	
  applicable	
  mortgage	
  loan.	
  We	
  have	
  determined	
  that	
  
certain	
  debt	
  service	
  coverage	
  ratio	
  covenants	
  contained	
  in	
  the	
  loan	
  agreements	
  securing	
  four	
  of	
  our	
  hotel	
  
properties	
  were	
  not	
  met	
  as	
  of	
  December	
  31,	
  2014.	
  Pursuant	
  to	
  these	
  loan	
  agreements,	
  the	
  lender	
  has	
  elected	
  to	
  
escrow	
  the	
  operating	
  cash	
  flow	
  for	
  a	
  number	
  of	
  these	
  properties.	
  However,	
  these	
  covenants	
  do	
  not	
  constitute	
  an	
  
event	
  of	
  default	
  for	
  these	
  loans.	
  

As	
  of	
  December	
  31,	
  2014,	
  the	
  maturity	
  dates	
  for	
  the	
  outstanding	
  mortgage	
  loans	
  ranged	
  from	
  January	
  2015	
  to	
  
April	
  2023.	
  

Subordinated	
  Notes	
  Payable	
  

We	
  have	
  two	
  junior	
  subordinated	
  notes	
  payable	
  in	
  the	
  aggregate	
  amount	
  of	
  $51,548	
  to	
  the	
  Hersha	
  Statutory	
  
Trusts	
  pursuant	
  to	
  indenture	
  agreements	
  which	
  will	
  mature	
  on	
  July	
  30,	
  2035,	
  but	
  may	
  be	
  redeemed	
  at	
  our	
  option,	
  
in	
  whole	
  or	
  in	
  part,	
  prior	
  to	
  maturity	
  in	
  accordance	
  with	
  the	
  provisions	
  of	
  the	
  indenture	
  agreements.	
  	
  The	
  $25,774	
  
notes	
  issued	
  to	
  Hersha	
  Statutory	
  Trust	
  I	
  and	
  Hersha	
  Statutory	
  Trust	
  II,	
  bear	
  interest	
  at	
  a	
  variable	
  rate	
  of	
  LIBOR	
  plus	
  
3%	
  per	
  annum.	
  	
  This	
  rate	
  resets	
  two	
  business	
  days	
  prior	
  to	
  each	
  quarterly	
  payment.	
  	
  The	
  weighted	
  average	
  interest	
  
rate	
  on	
  our	
  two	
  junior	
  subordinated	
  notes	
  payable	
  during	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012	
  
was	
  3.28%,	
  3.32%,	
  and	
  3.51%,	
  respectively.	
  	
  Interest	
  expense	
  in	
  the	
  amount	
  of	
  $1,690,	
  $1,712,	
  and	
  $1,810	
  was	
  
recorded	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  

Credit	
  Facilities	
  

On	
  February	
  28,	
  2014,	
  we	
  entered	
  into	
  a	
  senior	
  unsecured	
  credit	
  agreement	
  with	
  Citigroup	
  Global	
  Markets	
  Inc.	
  
and	
  various	
  other	
  lenders.	
  The	
  credit	
  agreement	
  provides	
  for	
  a	
  $500,000	
  senior	
  unsecured	
  credit	
  facility	
  consisting	
  
of	
  a	
  $250,000	
  senior	
  unsecured	
  revolving	
  line	
  of	
  credit	
  and	
  a	
  $250,000	
  senior	
  unsecured	
  term	
  loan.	
  This	
  new	
  
facility	
  amended	
  and	
  restated	
  the	
  existing	
  $400,000	
  senior	
  unsecured	
  credit	
  facility.	
  The	
  $500,000	
  unsecured	
  
credit	
  facility	
  expires	
  on	
  February	
  28,	
  2018	
  and,	
  provided	
  no	
  event	
  of	
  default	
  has	
  occurred,	
  we	
  may	
  request	
  that	
  
the	
  lenders	
  renew	
  the	
  credit	
  facility	
  for	
  an	
  additional	
  one-‐year	
  period.	
  The	
  credit	
  facility	
  is	
  also	
  expandable	
  to	
  
$850,000	
  at	
  our	
  request,	
  subject	
  to	
  the	
  satisfaction	
  of	
  certain	
  conditions.	
  

Prior	
  to	
  February	
  28,	
  2014,	
  we	
  maintained	
  a	
  senior	
  unsecured	
  credit	
  agreement	
  with	
  Citigroup	
  Global	
  Markets	
  Inc.	
  
and	
  various	
  other	
  lenders.	
  The	
  credit	
  agreement	
  provided	
  for	
  a	
  $400,000	
  senior	
  unsecured	
  credit	
  facility	
  consisting	
  
of	
  a	
  $250,000	
  senior	
  unsecured	
  revolving	
  line	
  of	
  credit	
  and	
  a	
  $150,000	
  senior	
  unsecured	
  term	
  loan.	
  

63 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  5	
  –	
  DEBT	
  (CONTINUED)	
  

The	
  amount	
  that	
  we	
  can	
  borrow	
  at	
  any	
  given	
  time	
  on	
  our	
  credit	
  facility	
  is	
  governed	
  by	
  certain	
  operating	
  metrics	
  of	
  
designated	
  unencumbered	
  hotel	
  properties	
  known	
  as	
  borrowing	
  base	
  assets.	
  As	
  of	
  December	
  31,	
  2014,	
  the	
  
following	
  hotel	
  properties	
  were	
  borrowing	
  base	
  assets:	
  

-‐	
  Holiday	
  Inn	
  Express,	
  Cambridge,	
  MA	
  

-‐	
  Hampton	
  Inn,	
  Philadelphia,	
  PA	
  

-‐	
  Holiday	
  Inn,	
  Wall	
  Street,	
  NY	
  

-‐	
  Hampton	
  Inn,	
  Washington,	
  DC	
  

-‐	
  Holiday	
  Inn	
  Express,	
  Times	
  Square,	
  NY	
  

-‐	
  Hyatt	
  Place,	
  King	
  of	
  Prussia,	
  PA	
  

-‐	
  Residence	
  Inn,	
  Norwood,	
  MA	
  

-‐	
  Nu	
  Hotel,	
  Brooklyn,	
  NY	
  

-‐	
  Residence	
  Inn,	
  Framingham,	
  MA	
  

-‐	
  The	
  Rittenhouse	
  Hotel,	
  Philadelphia,	
  PA	
  

-‐	
  Sheraton,	
  Wilmington	
  South,	
  DE	
  

-‐	
  The	
  Boxer,	
  Boston,	
  MA	
  

-‐	
  Sheraton	
  Hotel,	
  JFK	
  Airport,	
  New	
  York,	
  NY	
  

-‐	
  Holiday	
  Inn	
  Express	
  (Water	
  Street),	
  New	
  York,	
  NY	
  

-‐	
  Candlewood	
  Suites,	
  Times	
  Square,	
  NY	
  

-‐	
  Courtyard,	
  San	
  Diego,	
  CA	
  

-‐	
  Hampton	
  Inn,	
  Times	
  Square,	
  NY	
  

-‐	
  Residence	
  Inn,	
  Coconut	
  Grove,	
  FL	
  

-‐	
  Winter	
  Haven,	
  Miami,	
  FL	
  

-‐	
  Hampton	
  Inn,	
  Pearl	
  Street,	
  NY	
  

-‐	
  Residence	
  Inn,	
  Greenbelt,	
  MD	
  

-‐	
  Blue	
  Moon,	
  Miami,	
  FL	
  

-‐	
  Parrot	
  Key	
  Resort,	
  Key	
  West,	
  FL	
  

The	
  interest	
  rate	
  for	
  the	
  $500,000	
  unsecured	
  credit	
  facility	
  is	
  based	
  on	
  a	
  pricing	
  grid	
  with	
  a	
  range	
  of	
  one	
  month	
  
U.S.	
  LIBOR	
  plus	
  1.70%	
  to	
  2.45%	
  for	
  the	
  revolving	
  line	
  of	
  credit	
  and	
  1.60%	
  to	
  2.35%	
  for	
  the	
  unsecured	
  term	
  loan.	
   	
  	
  

As	
  of	
  December	
  31,	
  2014,	
  we	
  had	
  borrowed	
  $250,000	
  in	
  unsecured	
  term	
  loans	
  under	
  the	
  unsecured	
  credit	
  facility,	
  
$150,000	
  for	
  which	
  we	
  had	
  entered	
  into	
  interest	
  rate	
  swaps	
  which	
  effectively	
  fix	
  the	
  interest	
  rate	
  on	
  these	
  term	
  
loans	
  at	
  a	
  blended	
  rate	
  of	
  3.217%.	
  See	
  “Note	
  7	
  –	
  Fair	
  Value	
  Measurements	
  and	
  Derivative	
  Instruments”	
  for	
  more	
  
information.	
  

The	
  credit	
  agreement	
  providing	
  for	
  the	
  $500,000	
  unsecured	
  credit	
  facility	
  includes	
  certain	
  financial	
  covenants	
  and	
  
requires	
  that	
  we	
  maintain:	
  (1)	
  a	
  minimum	
  tangible	
  net	
  worth	
  of	
  $803,711,	
  which	
  is	
  calculated	
  by	
  adding	
  back	
  
accumulated	
  depreciation	
  to	
  the	
  recorded	
  value	
  of	
  our	
  investment	
  in	
  hotel	
  properties	
  and	
  subtracting	
  certain	
  
intangible	
  assets	
  and	
  debt	
  and	
  is	
  subject	
  to	
  increases	
  under	
  certain	
  circumstances;	
  (2)	
  annual	
  distributions	
  not	
  to	
  
exceed	
  95%	
  of	
  adjusted	
  funds	
  from	
  operations;	
  and	
  (3)	
  certain	
  financial	
  ratios,	
  including	
  the	
  following:	
  

·∙	
  

·∙	
  
·∙	
  

a	
  fixed	
  charge	
  coverage	
  ratio	
  of	
  not	
  less	
  than	
  1.45	
  to	
  1.00,	
  which	
  increases	
  to	
  1.50	
  to	
  1.00	
  as	
  of	
  January	
  1,	
  

2016;	
  

a	
  maximum	
  leverage	
  ratio	
  of	
  not	
  more	
  than	
  60%;	
  and	
  
a	
  maximum	
  secured	
  debt	
  leverage	
  ratio	
  of	
  50%,	
  which	
  decreases	
  to	
  45%	
  as	
  of	
  January	
  1,	
  2016	
  

The	
  Company	
  is	
  in	
  compliance	
  with	
  each	
  of	
  the	
  covenants	
  listed	
  above	
  as	
  of	
  December	
  31,	
  2014.	
  As	
  of	
  December	
  
31,	
  2014,	
  our	
  remaining	
  borrowing	
  capacity	
  under	
  the	
  $500,000	
  unsecured	
  credit	
  facility	
  was	
  $245,745,	
  based	
  on	
  
the	
  borrowing	
  base	
  assets	
  at	
  December	
  31,	
  2014.	
  

As	
  of	
  December	
  31,	
  2014,	
  the	
  outstanding	
  unsecured	
  term	
  loan	
  balance	
  under	
  the	
  $500,000	
  unsecured	
  credit	
  
facility	
  was	
  $250,000	
  and	
  we	
  had	
  outstanding	
  borrowings	
  of	
  $0	
  on	
  the	
  revolving	
  line	
  of	
  credit.	
  As	
  of	
  December	
  31,	
  
2013,	
  the	
  outstanding	
  unsecured	
  term	
  loan	
  under	
  the	
  prior	
  $400,000	
  unsecured	
  credit	
  facility	
  was	
  $150,000	
  and	
  

64 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  5	
  –	
  DEBT	
  (CONTINUED)	
  

the	
  revolving	
  line	
  of	
  credit	
  had	
  no	
  balance	
  outstanding.	
  

The	
  Company	
  recorded	
  interest	
  expense	
  of	
  $6,218,	
  $5,413,	
  and	
  $2,405	
  related	
  to	
  borrowings	
  drawn	
  on	
  each	
  of	
  the	
  
aforementioned	
  credit	
  facilities,	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  The	
  
weighted	
  average	
  interest	
  rate	
  on	
  our	
  credit	
  facilities	
  was	
  2.82%,	
  3.08%,	
  and	
  4.57%	
  for	
  the	
  years	
  ended	
  December	
  
31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  

Aggregate	
  annual	
  principal	
  payments	
  for	
  the	
  Company’s	
  credit	
  facility	
  and	
  mortgages	
  and	
  subordinated	
  notes	
  
payable	
  for	
  the	
  five	
  years	
  following	
  December	
  31,	
  2015	
  and	
  thereafter	
  are	
  as	
  follows:	
  

Year	
  Ending	
  December	
  31,	
  

Amount	
  

2015	
  
2016	
  
2017	
  
2018	
  
2019	
  
Thereafter	
  
Net	
  Unamortized	
  Premium	
  

Capitalized	
  Interest	
  

$	
  

$	
  

	
   69,063	
  
	
   273,824	
  
	
   204,219	
  
	
   1,564	
  
	
   294,892	
  
	
   73,777	
  
	
   1,584	
  
	
   918,923	
  

We	
  utilize	
  mortgage	
  debt	
  and	
  our	
  $500,000	
  revolving	
  credit	
  facility	
  to	
  finance	
  on-‐going	
  capital	
  improvement	
  
projects	
  at	
  our	
  hotels.	
  Interest	
  incurred	
  on	
  mortgages	
  and	
  the	
  revolving	
  credit	
  facility	
  that	
  relates	
  to	
  our	
  capital	
  
improvement	
  projects	
  is	
  capitalized	
  through	
  the	
  date	
  when	
  the	
  assets	
  are	
  placed	
  in	
  service.	
  For	
  the	
  years	
  ended	
  
December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  we	
  capitalized	
  $458,	
  $1,320,	
  and	
  $1,542	
  respectively,	
  of	
  interest	
  expense	
  
related	
  to	
  these	
  projects.	
  

Deferred	
  Financing	
  Costs	
  

Costs	
  associated	
  with	
  entering	
  into	
  mortgages	
  and	
  notes	
  payable	
  and	
  our	
  revolving	
  line	
  of	
  credit	
  are	
  deferred	
  and	
  
amortized	
  over	
  the	
  life	
  of	
  the	
  debt	
  instruments.	
  Amortization	
  of	
  deferred	
  financing	
  costs	
  is	
  recorded	
  in	
  interest	
  
expense.	
  	
  	
   As	
  of	
  December	
  31,	
  2014,	
  deferred	
  costs	
  were	
  $8,605,	
  net	
  of	
  accumulated	
  amortization	
  of	
  $6,938.	
  
Amortization	
  of	
  deferred	
  costs	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012	
  was	
  $2,768,	
  $2,886,	
  and	
  
$2,991	
  respectively.	
  

Debt	
  Payoff	
  

On	
  October	
  27,	
  2014,	
  we	
  repaid	
  $10,179	
  on	
  our	
  mortgage	
  with	
  Berkadia	
  Commercial	
  Mortgage,	
  LLC	
  for	
  the	
  
Residence	
  Inn,	
  Greenbelt,	
  MD	
  property.	
  The	
  loan	
  was	
  due	
  to	
  mature	
  in	
  October	
  2014,	
  and	
  we	
  incurred	
  no	
  loss	
  on	
  
debt	
  extinguishment	
  in	
  paying	
  off	
  the	
  loan.	
  

On	
  June	
  30,	
  2013,	
  we	
  repaid	
  $7,928	
  on	
  our	
  mortgage	
  with	
  Berkadia	
  Commercial	
  Mortgage,	
  LLC	
  for	
  the	
  Residence	
  
Inn,	
  Tysons	
  Corner,	
  VA	
  property.	
   	
   The	
  loan	
  was	
  due	
  to	
  mature	
  in	
  July	
  2013,	
  and	
  we	
  incurred	
  no	
  loss	
  on	
  debt	
  
extinguishment	
  in	
  paying	
  off	
  the	
  loan.	
  

On	
  January	
  3,	
  2013,	
  we	
  funded	
  an	
  additional	
  $50,000	
  in	
  unsecured	
  term	
  loan	
  borrowings	
  under	
  our	
  then	
  $400,000	
  
unsecured	
  credit	
  facility	
  which	
  was	
  used	
  to	
  pay	
  off	
  the	
  balance	
  of	
  the	
  mortgage	
  loan	
  secured	
  by	
  the	
  Holiday	
  Inn	
  
Express,	
  Times	
  Square,	
  New	
  York,	
  NY	
  on	
  January	
  7,	
  2013.	
  	
  This	
  mortgage	
  was	
  also	
  subject	
  to	
  an	
  interest	
  rate	
  swap,	
   	
  

65 

	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  5	
  –	
  DEBT	
  (CONTINUED)	
  

which	
  was	
  terminated	
  as	
  a	
  cash	
  flow	
  hedge	
  as	
  of	
  December	
  31,	
  2012	
  due	
  to	
  this	
  payoff.	
  	
  As	
  a	
  result	
  of	
  this	
  payoff,	
  
we	
  expensed	
  $261	
  in	
  unamortized	
  deferred	
  financing	
  costs	
  and	
  fees,	
  which	
  are	
  included	
  in	
  the	
  Loss	
  on	
  Debt	
  
Extinguishment	
  caption	
  of	
  the	
  consolidated	
  statements	
  of	
  operations	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2013.	
  Due	
  
to	
  the	
  timing	
  of	
  this	
  transaction,	
  the	
  hedge	
  relationship	
  on	
  our	
  interest	
  rate	
  swap	
  was	
  derecognized	
  as	
  of	
  
December	
  31,	
  2012.	
  Therefore,	
  the	
  accumulated	
  other	
  comprehensive	
  loss	
  on	
  this	
  swap	
  as	
  of	
  December	
  31,	
  2012,	
  
was	
  reclassified	
  to	
  income	
  and	
  we	
  recorded	
  $530	
  in	
  the	
  Loss	
  on	
  Debt	
  Extinguishment	
  on	
  the	
  statement	
  of	
  
operations	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  

As	
  previously	
  mentioned,	
  we	
  replaced	
  our	
  previous	
  $250,000	
  secured	
  credit	
  facility	
  with	
  a	
  new	
  $400,000	
  
unsecured	
  credit	
  facility	
  with	
  Citigroup	
  Global	
  Markets	
  Inc.	
  and	
  various	
  other	
  lenders	
  on	
  November	
  5,	
  2012.	
  
Concurrently	
  with	
  this	
  closing,	
  we	
  funded	
  $100,000	
  in	
  unsecured	
  term	
  loan	
  borrowings.	
  These	
  borrowings	
  were	
  
used	
  to	
  pay	
  off	
  in	
  full	
  the	
  balance	
  on	
  seven	
  mortgage	
  loans	
  on	
  hotel	
  properties.	
  As	
  a	
  result	
  of	
  terminating	
  our	
  
previous	
  $250,000	
  secured	
  credit	
  facility	
  and	
  extinguishing	
  the	
  debt	
  on	
  these	
  seven	
  properties,	
  we	
  expensed	
  
$2,410	
  in	
  unamortized	
  deferred	
  financing	
  costs	
  and	
  fees,	
  which	
  are	
  included	
  in	
  the	
  Loss	
  of	
  Debt	
  Extinguishment	
  
caption	
  on	
  the	
  consolidated	
  statements	
  of	
  operations	
  for	
  the	
  year	
  ended	
  December	
  31,	
  2012.	
  

New	
  Debt/Refinance	
  

On	
  November	
  13,	
  2014,	
  we	
  repaid	
  outstanding	
  mortgage	
  debt	
  on	
  with	
  an	
  original	
  principal	
  balance	
  of	
  $32,000	
  
secured	
  by	
  the	
  Hilton	
  Garden	
  Inn,	
  Tribeca,	
  NY	
  and	
  simultaneously	
  entered	
  into	
  a	
  new	
  mortgage	
  obligation	
  of	
  
$46,500	
  with	
  a	
  new	
  lender.	
  The	
  new	
  mortgage	
  debt	
  bears	
  interest	
  at	
  a	
  variable	
  rate	
  of	
  one	
  month	
  U.S.	
  dollar	
  
LIBOR	
  plus	
  2.30%	
  and	
  matures	
  on	
  November	
  1,	
  2019.	
  

As	
  previously	
  mentioned,	
  we	
  refinanced	
  our	
  previous	
  $400,000	
  unsecured	
  credit	
  facility	
  with	
  a	
  $500,000	
  
unsecured	
  credit	
  facility	
  with	
  Citigroup	
  Global	
  Markets	
  Inc.	
  and	
  various	
  other	
  lenders	
  on	
  February	
  28,	
  2014.	
  As	
  a	
  
result	
  of	
  this	
  refinance,	
  we	
  expensed	
  $579	
  in	
  unamortized	
  deferred	
  financing	
  costs	
  and	
  fees,	
  which	
  are	
  included	
  in	
  
the	
  Loss	
  on	
  Debt	
  Extinguishment	
  caption	
  of	
  the	
  consolidated	
  statements	
  of	
  operations	
  for	
  the	
  year	
  ended	
  
December	
  31,	
  2014.	
  

On	
  January,	
  31,	
  2014,	
  we	
  paid	
  down	
  $5,175	
  of	
  the	
  outstanding	
  debt	
  and	
  modified	
  the	
  mortgage	
  loan	
  on	
  the	
  Duane	
  
Street	
  Hotel,	
  New	
  York,	
  NY.	
  As	
  a	
  result,	
  we	
  entered	
  into	
  a	
  $9,500	
  loan	
  with	
  a	
  maturity	
  date	
  of	
  February	
  1,	
  2017.	
  
The	
  modified	
  loan	
  bears	
  interest	
  at	
  a	
  variable	
  rate	
  of	
  one	
  month	
  U.S.	
  dollar	
  LIBOR	
  plus	
  4.50%.	
  The	
  modification	
  
also	
  includes	
  an	
  interest	
  rate	
  swap,	
  which	
  effectively	
  fixes	
  the	
  interest	
  rate	
  at	
  5.433%.	
   	
   As	
  a	
  result	
  of	
  this	
  
modification,	
  we	
  expensed	
  $91	
  in	
  unamortized	
  deferred	
  financial	
  costs	
  and	
  fees	
  during	
  the	
  year	
  ended	
  December	
  
31,	
  2014.	
   	
  

On	
  April	
  24,	
  2013,	
  we	
  modified	
  the	
  $30,000	
  mortgage	
  loan	
  on	
  the	
  Courtyard	
  by	
  Marriott,	
  Westside,	
  Los	
  Angeles,	
  
CA.	
   	
   The	
  modified	
  loan	
  bears	
  interest	
  at	
  a	
  variable	
  rate	
  of	
  one	
  month	
  U.S.	
  dollar	
  LIBOR	
  plus	
  3.00%,	
  and	
  matures	
  
on	
  September	
  29,	
  2017.	
  The	
  modification	
  also	
  contains	
  an	
  option	
  for	
  the	
  Company	
  to	
  advance	
  $5,000	
  in	
  principal	
  
subject	
  to	
  certain	
  conditions,	
  including	
  there	
  being	
  no	
  event	
  of	
  default	
  and	
  compliance	
  with	
  debt	
  service	
  coverage	
  
ratio	
  requirements.	
   	
   As	
  a	
  result	
  of	
  this	
  modification,	
  we	
  incurred	
  a	
  loss	
  on	
  debt	
  extinguishment	
  of	
  $284.	
   	
   This	
  
modification	
  did	
  not	
  change	
  the	
  terms	
  of	
  the	
  interest	
  rate	
  swap	
  that	
  we	
  entered	
  into	
  in	
  2011,	
  which	
  had	
  
effectively	
  fixed	
  the	
  interest	
  at	
  4.947%,	
  and	
  now	
  effectively	
  fixes	
  the	
  interest	
  at	
  4.10%	
  through	
  September	
  29,	
  
2015.	
   	
   After	
  the	
  maturity	
  date	
  of	
  the	
  swap,	
  the	
  loan	
  will	
  bear	
  interest	
  at	
  the	
  stated	
  variable	
  rate	
  of	
  one-‐month	
  
U.S.	
  dollar	
  LIBOR	
  plus	
  3.00%,	
  with	
  a	
  LIBOR	
  floor	
  of	
  0.75%.	
   	
   See	
  “Note	
  7	
  –	
  Fair	
  Value	
  Measurements	
  and	
  Derivative	
  
Instruments”	
  for	
  more	
  information.	
  

On	
  May	
  23,	
  2012,	
  we	
  repaid	
  outstanding	
  mortgage	
  debt	
  with	
  an	
  original	
  principal	
  balance	
  of	
  $22,000	
  secured	
  by	
  
the	
  Hotel	
  373,	
  Fifth	
  Avenue,	
  NY,	
  and	
  on	
  May	
  24,	
  2012	
  entered	
  into	
  a	
  new	
  mortgage	
  obligation	
  of	
  $19,000,	
   	
  

66 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  5	
  –	
  DEBT	
  (CONTINUED)	
  

incurring	
  a	
  loss	
  on	
  debt	
  extinguishment	
  of	
  approximately	
  $66.	
  	
  The	
  new	
  mortgage	
  debt	
  bears	
  interest	
  at	
  a	
  variable	
  
rate	
  of	
  one	
  month	
  U.S.	
  dollar	
  LIBOR	
  plus	
  3.85%	
  and	
  matures	
  on	
  June	
  1,	
  2017.	
  	
  In	
  conjunction	
  with	
  this	
  refinance,	
  
we	
  entered	
  into	
  an	
  interest	
  rate	
  cap	
  that	
  matures	
  on	
  June	
  1,	
  2015	
  that	
  effectively	
  limits	
  interest	
  to	
  5.85%	
  per	
  
annum.	
  

On	
  May	
  9,	
  2012,	
  we	
  repaid	
  outstanding	
  mortgage	
  debt	
  with	
  a	
  principal	
  balance	
  of	
  $29,730	
  secured	
  by	
  the	
  
Courtyard	
  by	
  Marriott,	
  Miami,	
  FL.	
  	
  On	
  July	
  2,	
  2012,	
  we	
  entered	
  into	
  a	
  new	
  mortgage	
  with	
  an	
  initial	
  obligation	
  of	
  
$45,000,	
  with	
  three	
  additional	
  draws	
  of	
  $5,000	
  every	
  90	
  days	
  to	
  fund	
  the	
  construction	
  of	
  the	
  new	
  oceanfront	
  
tower	
  as	
  described	
  in	
  “Note	
  2	
  –	
  Investment	
  in	
  Hotel	
  Properties”.	
  	
  The	
  new	
  mortgage	
  debt	
  bears	
  interest	
  at	
  a	
  
variable	
  rate	
  of	
  one	
  month	
  U.S.	
  LIBOR	
  plus	
  3.50%	
  and	
  matures	
  on	
  July	
  1,	
  2016.	
  	
  Also	
  on	
  July	
  2,	
  2012,	
  we	
  entered	
  
into	
  an	
  interest	
  rate	
  cap	
  that	
  effectively	
  limits	
  interest	
  to	
  4.32%	
  per	
  annum.	
  

On	
  January	
  31,	
  2012,	
  we	
  repaid	
  outstanding	
  mortgage	
  debt	
  with	
  an	
  original	
  principal	
  balance	
  of	
  $32,500	
  secured	
  
by	
  the	
  Capitol	
  Hill	
  Suites,	
  Washington,	
  D.C.,	
  incurring	
  a	
  loss	
  on	
  debt	
  extinguishment	
  of	
  approximately	
  $7	
  and	
  
simultaneously	
  entered	
  into	
  a	
  new	
  mortgage	
  obligation	
  of	
  $27,500.	
  	
  The	
  new	
  mortgage	
  debt	
  bears	
  interest	
  at	
  a	
  
variable	
  rate	
  of	
  one	
  month	
  U.S.	
  dollar	
  LIBOR	
  plus	
  3.25%	
  and	
  matures	
  on	
  February	
  1,	
  2015.	
  	
  On	
  the	
  same	
  date,	
  we	
  
entered	
  into	
  an	
  interest	
  rate	
  swap	
  that	
  effectively	
  fixes	
  the	
  interest	
  at	
  3.79%	
  per	
  annum.	
  

As	
  a	
  result	
  of	
  our	
  acquisition	
  of	
  Metro	
  29th,	
  first	
  mortgage	
  debt	
  with	
  a	
  principal	
  balance	
  of	
  $54,602	
  secured	
  by	
  the	
  
Holiday	
  Inn	
  Express,	
  New	
  York,	
  NY	
  is	
  included	
  on	
  our	
  consolidated	
  balance	
  sheet.	
  	
  This	
  debt	
  bears	
  interest	
  at	
  a	
  
fixed	
  rate	
  of	
  6.50%	
  and	
  matures	
  on	
  November	
  5,	
  2016.	
  	
  In	
  addition,	
  we	
  consolidated	
  mezzanine	
  debt	
  with	
  a	
  
principal	
  balance	
  of	
  $15,000.	
  	
  We	
  repaid	
  this	
  mezzanine	
  debt	
  on	
  June	
  29,	
  2012	
  and	
  incurred	
  a	
  loss	
  on	
  debt	
  
extinguishment	
  of	
  approximately	
  $176.	
  

67 

	
  
	
  
	
  
	
  
	
  
	
  
 
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  6	
  –	
  COMMITMENTS	
  AND	
  CONTINGENCIES	
  AND	
  RELATED	
  PARTY	
  TRANSACTIONS	
  

Management	
  Agreements	
  

Our	
  wholly-‐owned	
  taxable	
  REIT	
  subsidiary	
  ("TRS"),	
  44	
  New	
  England,	
  engages	
  eligible	
  independent	
  contractors	
  in	
  
accordance	
  with	
  the	
  requirements	
  for	
  qualification	
  as	
  a	
  REIT	
  under	
  the	
  internal	
  revenue	
  code	
  of	
  1986,	
  as	
  
amended,	
  including	
  HHMLP,	
  as	
  the	
  property	
  managers	
  for	
  hotels	
  it	
  leases	
  from	
  us	
  pursuant	
  to	
  management	
  
agreements.	
  HHMLP	
  is	
  owned,	
  in	
  part,	
  by	
  certain	
  executives	
  and	
  trustees	
  of	
  the	
  Company.	
  Our	
  management	
  
agreements	
  with	
  HHMLP	
  provide	
  for	
  five-‐year	
  terms	
  and	
  are	
  subject	
  to	
  early	
  termination	
  upon	
  the	
  occurrence	
  of	
  
defaults	
  and	
  certain	
  other	
  events	
  described	
  therein.	
  As	
  required	
  under	
  the	
  REIT	
  qualification	
  rules,	
  HHMLP	
  must	
  
qualify	
  as	
  an	
  “eligible	
  independent	
  contractor”	
  during	
  the	
  term	
  of	
  the	
  management	
  agreements.	
  Under	
  the	
  
management	
  agreements,	
  HHMLP	
  generally	
  pays	
  the	
  operating	
  expenses	
  of	
  our	
  hotels.	
  All	
  operating	
  expenses	
  or	
  
other	
  expenses	
  incurred	
  by	
  HHMLP	
  in	
  performing	
  its	
  authorized	
  duties	
  are	
  reimbursed	
  or	
  borne	
  by	
  our	
  TRS	
  to	
  the	
  
extent	
  the	
  operating	
  expenses	
  or	
  other	
  expenses	
  are	
  incurred	
  within	
  the	
  limits	
  of	
  the	
  applicable	
  approved	
  hotel	
  
operating	
  budget.	
  HHMLP	
  is	
  not	
  obligated	
  to	
  advance	
  any	
  of	
  its	
  own	
  funds	
  for	
  operating	
  expenses	
  of	
  a	
  hotel	
  or	
  to	
  
incur	
  any	
  liability	
  in	
  connection	
  with	
  operating	
  a	
  hotel.	
  Management	
  agreements	
  with	
  other	
  unaffiliated	
  hotel	
  
management	
  companies	
  have	
  similar	
  terms.	
  

For	
  its	
  services,	
  HHMLP	
  receives	
  a	
  base	
  management	
  fee	
  and,	
  if	
  a	
  hotel	
  exceeds	
  certain	
  thresholds,	
  an	
  incentive	
  
management	
  fee.	
  The	
  base	
  management	
  fee	
  for	
  a	
  hotel	
  is	
  due	
  monthly	
  and	
  is	
  equal	
  to	
  3%	
  of	
  gross	
  revenues	
  
associated	
  with	
  each	
  hotel	
  managed	
  for	
  the	
  related	
  month.	
  The	
  incentive	
  management	
  fee,	
  if	
  any,	
  for	
  a	
  hotel	
  is	
  
due	
  annually	
  in	
  arrears	
  on	
  the	
  ninetieth	
  day	
  following	
  the	
  end	
  of	
  each	
  fiscal	
  year	
  and	
  is	
  based	
  upon	
  the	
  financial	
  
performance	
  of	
  the	
  hotels.	
  For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  base	
  management	
  fees	
  
incurred	
  totaled	
  $12,263,	
  $11,713,	
  and	
  $10,781	
  respectively,	
  and	
  are	
  recorded	
  as	
  Hotel	
  Operating	
  Expenses.	
  For	
  
the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  we	
  did	
  not	
  incur	
  incentive	
  management	
  fees.	
  

Franchise	
  Agreements	
  

Our	
  branded	
  hotel	
  properties	
  are	
  operated	
  under	
  franchise	
  agreements	
  assumed	
  by	
  the	
  hotel	
  property	
  lessee.	
  The	
  
franchise	
  agreements	
  have	
  10	
  to	
  20	
  year	
  terms,	
  but	
  may	
  be	
  terminated	
  by	
  either	
  the	
  franchisee	
  or	
  franchisor	
  on	
  
certain	
  anniversary	
  dates	
  specified	
  in	
  the	
  agreements.	
  The	
  franchise	
  agreements	
  require	
  annual	
  payments	
  for	
  
franchise	
  royalties,	
  reservation,	
  and	
  advertising	
  services,	
  and	
  such	
  payments	
  are	
  based	
  upon	
  percentages	
  of	
  gross	
  
room	
  revenue.	
  These	
  payments	
  are	
  paid	
  by	
  the	
  hotels	
  and	
  charged	
  to	
  expense	
  as	
  incurred.	
  Franchise	
  fee	
  expense	
  
for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012	
  were	
  $26,015,	
  $26,247,	
  and	
  $24,278	
  respectively,	
  and	
  are	
  
recorded	
  in	
  Hotel	
  Operating	
  Expenses.	
  The	
  initial	
  fees	
  incurred	
  to	
  enter	
  into	
  the	
  franchise	
  agreements	
  are	
  
amortized	
  over	
  the	
  life	
  of	
  the	
  franchise	
  agreements.	
  

Accounting	
  and	
  Information	
  Technology	
  Fees	
  

Each	
  of	
  the	
  wholly-‐owned	
  hotels	
  and	
  consolidated	
  joint	
  venture	
  hotel	
  properties	
  managed	
  by	
  HHMLP	
  incurs	
  a	
  
monthly	
  accounting	
  and	
  information	
  technology	
  fee.	
  Monthly	
  fees	
  for	
  accounting	
  services	
  are	
  between	
  $2	
  and	
  $3	
  
per	
  property	
  and	
  monthly	
  information	
  technology	
  fees	
  range	
  from	
  $1	
  to	
  $2	
  per	
  property.	
  For	
  the	
  years	
  ended	
  
December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  the	
  Company	
  incurred	
  accounting	
  fees	
  of	
  $1,410,	
  $1,739,	
  and	
  $1,741	
  
respectively.	
  For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  the	
  Company	
  incurred	
  information	
  
technology	
  fees	
  of	
  $416,	
  $510,	
  and	
  $509	
  respectively.	
  Accounting	
  fees	
  and	
  information	
  technology	
  fees	
  are	
  
included	
  in	
  Hotel	
  Operating	
  Expenses.	
  

Capital	
  Expenditure	
  Fees	
  

HHMLP	
  charges	
  a	
  5%	
  fee	
  on	
  all	
  capital	
  expenditures	
  and	
  pending	
  renovation	
  projects	
  at	
  the	
  properties	
  as	
  
compensation	
  for	
  procurement	
  services	
  related	
  to	
  capital	
  expenditures	
  and	
  for	
  project	
  management	
  of	
  renovation	
  
projects.	
  For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  we	
  incurred	
  fees	
  of	
  $742,	
  $1,459,	
  and	
  $1,076	
  
respectively,	
  which	
  were	
  capitalized	
  with	
  the	
  cost	
  of	
  fixed	
  asset	
  additions.	
  

68 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  6	
  –	
  COMMITMENTS	
  AND	
  CONTINGENCIES	
  AND	
  RELATED	
  PARTY	
  TRANSACTIONS	
  (CONTINUED)	
  

Acquisitions	
  from	
  Affiliates	
  

We	
  have	
  entered	
  into	
  an	
  option	
  agreement	
  with	
  each	
  of	
  our	
  officers	
  and	
  certain	
  trustees	
  such	
  that	
  we	
  obtain	
  a	
  
right	
  of	
  first	
  refusal	
  to	
  purchase	
  any	
  hotel	
  owned	
  or	
  developed	
  in	
  the	
  future	
  by	
  these	
  individuals	
  or	
  entities	
  
controlled	
  by	
  them	
  at	
  fair	
  market	
  value.	
  This	
  right	
  of	
  first	
  refusal	
  would	
  apply	
  to	
  each	
  party	
  until	
  one	
  year	
  after	
  
such	
  party	
  ceases	
  to	
  be	
  an	
  officer	
  or	
  trustee	
  of	
  the	
  Company.	
  Our	
  Acquisition	
  Committee	
  of	
  the	
  Board	
  of	
  Trustees	
  
is	
  comprised	
  solely	
  of	
  independent	
  trustees,	
  and	
  the	
  purchase	
  prices	
  and	
  all	
  material	
  terms	
  of	
  the	
  purchase	
  of	
  
hotels	
  from	
  related	
  parties	
  are	
  approved	
  by	
  the	
  Acquisition	
  Committee.	
  

Hotel	
  Supplies	
  

For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  we	
  incurred	
  charges	
  for	
  hotel	
  supplies	
  of	
  $163,	
  $222,	
  
and	
  $149	
  respectively.	
  For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  we	
  incurred	
  charges	
  for	
  capital	
  
expenditure	
  purchases	
  of	
  $10,610,	
  $19,783,	
  and	
  $11,809	
  respectively.	
  These	
  purchases	
  were	
  made	
  from	
  Hersha	
  
Purchasing	
  and	
  Design,	
  a	
  hotel	
  supply	
  company	
  owned,	
  in	
  part,	
  by	
  certain	
  executives	
  and	
  trustees	
  of	
  the	
  Company.	
  
Hotel	
  supplies	
  are	
  expensed	
  and	
  included	
  in	
  Hotel	
  Operating	
  Expenses	
  on	
  our	
  consolidated	
  statements	
  of	
  
operations,	
  and	
  capital	
  expenditure	
  purchases	
  are	
  included	
  in	
  investment	
  in	
  hotel	
  properties	
  on	
  our	
  consolidated	
  
balance	
  sheets.	
  Approximately	
  $2	
  is	
  included	
  in	
  accounts	
  payable	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013,	
  
respectively.	
  

Due	
  From	
  Related	
  Parties	
  

The	
  due	
  from	
  related	
  parties	
  balance	
  as	
  of	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  was	
  approximately	
  $6,580	
  
and	
  $11,124,	
  respectively.	
  The	
  balances	
  primarily	
  consisted	
  of	
  working	
  capital	
  deposits	
  made	
  to	
  Hersha	
  affiliates.	
  

Due	
  to	
  Related	
  Parties	
  

The	
  balance	
  due	
  to	
  related	
  parties	
  as	
  of	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  was	
  approximately	
  $7,203	
  
and	
  $4,815,	
  respectively.	
  The	
  balances	
  consisted	
  of	
  amounts	
  payable	
  to	
  HHMLP	
  for	
  administrative,	
  management,	
  
and	
  benefit	
  related	
  fees.	
  

Hotel	
  Ground	
  Rent	
  

For	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012	
  we	
  incurred	
  $2,433,	
  $985,	
  and	
  $835	
  respectively,	
  of	
  rent	
  
expense	
  payable	
  pursuant	
  to	
  ground	
  leases	
  related	
  to	
  certain	
  hotel	
  properties.	
  

Future	
  minimum	
  lease	
  payments	
  (without	
  reflecting	
  future	
  applicable	
  Consumer	
  Price	
  Index	
  increases)	
  under	
  these	
  
agreements	
  are	
  as	
  follows:	
  

Year	
  Ending	
  December	
  31,	
  

Amount	
  

2015	
  
2016	
  
2017	
  
2018	
  
2019	
  
Thereafter	
  

$	
  

$	
  

	
   2,342	
  
	
   2,374	
  
	
   2,374	
  
	
   2,374	
  
	
   2,374	
  
	
   229,028	
  
	
   240,866	
  

69 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  6	
  –	
  COMMITMENTS	
  AND	
  CONTINGENCIES	
  AND	
  RELATED	
  PARTY	
  TRANSACTIONS	
  (CONTINUED)	
  

Contingent	
  Consideration	
  

As	
  noted	
  in	
  “Note	
  2	
  –	
  Investment	
  in	
  Hotel	
  Properties”,	
  the	
  purchase	
  agreement	
  for	
  the	
  acquisition	
  of	
  the	
  Parrot	
  
Key	
  Resort	
  in	
  Key	
  West,	
  FL,	
  contains	
  a	
  provision	
  that	
  entitles	
  the	
  seller	
  to	
  additional	
  consideration	
  of	
  $2,000	
  
contingent	
  upon	
  the	
  hotel	
  achieving	
  certain	
  net	
  operating	
  income	
  thresholds	
  within	
  twelve	
  months	
  of	
  acquisition.	
  
Since	
  the	
  time	
  of	
  acquisition	
  and	
  upon	
  measurement	
  at	
  December	
  31,	
  2014,	
  a	
  liability	
  of	
  $2,000	
  was	
  recorded	
  as	
  
the	
  fair	
  value	
  of	
  the	
  contingent	
  consideration	
  was	
  determined	
  to	
  be	
  $2,000.	
  The	
  maximum	
  cash	
  payment	
  under	
  
this	
  arrangement	
  is	
  $2,000	
  in	
  2015.	
  

Litigation	
  

We	
  are	
  not	
  presently	
  subject	
  to	
  any	
  material	
  litigation	
  nor,	
  to	
  our	
  knowledge,	
  is	
  any	
  other	
  litigation	
  threatened	
  
against	
  us,	
  other	
  than	
  routine	
  actions	
  for	
  negligence	
  or	
  other	
  claims	
  and	
  administrative	
  proceedings	
  arising	
  in	
  the	
  
ordinary	
  course	
  of	
  business,	
  some	
  of	
  which	
  are	
  expected	
  to	
  be	
  covered	
  by	
  liability	
  insurance	
  and	
  all	
  of	
  which	
  
collectively	
  are	
  not	
  expected	
  to	
  have	
  a	
  material	
  adverse	
  effect	
  on	
  our	
  liquidity,	
  results	
  of	
  operations	
  or	
  business	
  or	
  
financial	
  condition.	
  

70 

	
  
	
  
	
  
	
  
 
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  7	
  –	
  FAIR	
  VALUE	
  MEASUREMENTS	
  AND	
  DERIVATIVE	
  INSTRUMENTS	
  

Fair	
  Value	
  Measurements	
  

Our	
  determination	
  of	
  fair	
  value	
  measurements	
  are	
  based	
  on	
  the	
  assumptions	
  that	
  market	
  participants	
  would	
  use	
  
in	
  pricing	
  the	
  asset	
  or	
  liability.	
  As	
  a	
  basis	
  for	
  considering	
  market	
  participant	
  assumptions	
  in	
  fair	
  value	
  
measurements,	
  we	
  utilize	
  a	
  fair	
  value	
  hierarchy	
  that	
  distinguishes	
  between	
  market	
  participant	
  assumptions	
  based	
  
on	
  market	
  data	
  obtained	
  from	
  sources	
  independent	
  of	
  the	
  reporting	
  entity	
  (observable	
  inputs	
  that	
  are	
  classified	
  
within	
  Levels	
  1	
  and	
  2	
  of	
  the	
  hierarchy)	
  and	
  the	
  reporting	
  entity’s	
  own	
  assumptions	
  about	
  market	
  participant	
  
assumptions	
  (unobservable	
  inputs	
  classified	
  within	
  Level	
  3	
  of	
  the	
  hierarchy).	
  

Level	
  1	
  inputs	
  utilize	
  quoted	
  prices	
  (unadjusted)	
  in	
  active	
  markets	
  for	
  identical	
  assets	
  or	
  liabilities	
  that	
  the	
  
Company	
  has	
  the	
  ability	
  to	
  access.	
  Level	
  2	
  inputs	
  are	
  inputs	
  other	
  than	
  quoted	
  prices	
  included	
  in	
  Level	
  1	
  that	
  are	
  
observable	
  for	
  the	
  asset	
  or	
  liability,	
  either	
  directly	
  or	
  indirectly.	
  Level	
  2	
  inputs	
  may	
  include	
  quoted	
  prices	
  for	
  similar	
  
assets	
  and	
  liabilities	
  in	
  active	
  markets,	
  as	
  well	
  as	
  inputs	
  that	
  are	
  observable	
  for	
  the	
  asset	
  or	
  liability	
  (other	
  than	
  
quoted	
  prices),	
  such	
  as	
  interest	
  rates,	
  foreign	
  exchange	
  rates	
  and	
  yield	
  curves	
  that	
  are	
  observable	
  at	
  commonly	
  
quoted	
  intervals.	
  Level	
  3	
  inputs	
  are	
  unobservable	
  inputs	
  for	
  the	
  asset	
  or	
  liabilities,	
  which	
  are	
  typically	
  based	
  on	
  an	
  
entity’s	
  own	
  assumptions,	
  as	
  there	
  is	
  little,	
  if	
  any,	
  related	
  market	
  activity.	
  In	
  instances	
  where	
  the	
  determination	
  of	
  
the	
  fair	
  value	
  measurement	
  is	
  based	
  on	
  inputs	
  from	
  different	
  levels	
  of	
  the	
  fair	
  value	
  hierarchy,	
  the	
  level	
  in	
  the	
  fair	
  
value	
  hierarchy	
  within	
  which	
  the	
  entire	
  fair	
  value	
  measurement	
  falls	
  is	
  based	
  on	
  the	
  lowest	
  level	
  input	
  that	
  is	
  
significant	
  to	
  the	
  fair	
  value	
  measurement	
  in	
  its	
  entirety.	
  The	
  Company’s	
  assessment	
  of	
  the	
  significance	
  of	
  a	
  
particular	
  input	
  to	
  the	
  fair	
  value	
  measurement	
  in	
  its	
  entirety	
  requires	
  judgment,	
  and	
  considers	
  factors	
  specific	
  to	
  
the	
  asset	
  or	
  liability.	
  

As	
  of	
  December	
  31,	
  2014,	
  the	
  Company’s	
  derivative	
  instruments	
  represented	
  the	
  only	
  financial	
  instruments	
  
measured	
  at	
  fair	
  value.	
  Currently,	
  the	
  Company	
  uses	
  derivative	
  instruments,	
  such	
  as	
  interest	
  rate	
  swaps	
  and	
  
caps,	
  to	
  manage	
  its	
  interest	
  rate	
  risk.	
  The	
  valuation	
  of	
  these	
  instruments	
  is	
  determined	
  using	
  widely	
  accepted	
  
valuation	
  techniques,	
  including	
  discounted	
  cash	
  flow	
  analysis	
  on	
  the	
  expected	
  cash	
  flows	
  of	
  each	
  derivative.	
  This	
  
analysis	
  reflects	
  the	
  contractual	
  terms	
  of	
  the	
  derivatives,	
  including	
  the	
  period	
  to	
  maturity,	
  and	
  uses	
  observable	
  
market-‐based	
  inputs.	
  

We	
  incorporate	
  credit	
  valuation	
  adjustments	
  to	
  appropriately	
  reflect	
  both	
  our	
  own	
  nonperformance	
  risk	
  and	
  the	
  
respective	
  counterparty’s	
  nonperformance	
  risk	
  in	
  the	
  fair	
  value	
  measurements.	
  In	
  adjusting	
  the	
  fair	
  value	
  of	
  its	
  
derivative	
  contracts	
  for	
  the	
  effect	
  of	
  nonperformance	
  risk,	
  we	
  have	
  considered	
  the	
  impact	
  of	
  netting	
  and	
  any	
  
applicable	
  credit	
  enhancements,	
  such	
  as	
  collateral	
  postings,	
  thresholds,	
  mutual	
  puts	
  and	
  guarantees.	
  

Although	
  we	
  have	
  determined	
  that	
  the	
  majority	
  of	
  the	
  inputs	
  used	
  to	
  value	
  our	
  derivatives	
  fall	
  within	
  Level	
  2	
  of	
  the	
  
fair	
  value	
  hierarchy,	
  the	
  credit	
  valuation	
  adjustments	
  associated	
  with	
  our	
  derivatives	
  utilize	
  Level	
  3	
  inputs,	
  such	
  as	
  
estimates	
  of	
  current	
  credit	
  spreads,	
  to	
  evaluate	
  the	
  likelihood	
  of	
  default	
  by	
  us	
  and	
  the	
  counterparties.	
  However,	
  as	
  
of	
  December	
  31,	
  2014	
  we	
  have	
  assessed	
  the	
  significance	
  of	
  the	
  effect	
  of	
  the	
  credit	
  valuation	
  adjustments	
  on	
  the	
  
overall	
  valuation	
  of	
  our	
  derivative	
  positions	
  and	
  have	
  determined	
  that	
  the	
  credit	
  valuation	
  adjustments	
  are	
  not	
  
significant	
  to	
  the	
  overall	
  valuation	
  of	
  our	
  derivatives.	
  As	
  a	
  result,	
  we	
  have	
  determined	
  that	
  our	
  derivative	
  
valuations	
  in	
  their	
  entirety	
  are	
  classified	
  in	
  Level	
  2	
  of	
  the	
  fair	
  value	
  hierarchy.	
  

71 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  7	
  –	
  FAIR	
  VALUE	
  MEASUREMENTS	
  AND	
  DERIVATIVE	
  INSTRUMENTS	
  (CONTINUED)	
  

Derivative	
  Instruments	
  

Hedged	
  Debt	
  

Strike	
  
Rate	
  

	
  Type	
   	
  

Index	
  

	
  Effective	
  Date	
  

	
  Maturity	
  Date	
  

Estimated	
  Fair	
  Value	
   	
  

Notional	
  
Amount	
  

	
   December	
  
31,	
  2014	
  

	
   December	
  
31,	
  2013	
  

Courtyard,	
  LA	
  Westside,	
  
Culver	
  City,	
  LA	
  
Capitol	
  Hill	
  Hotel,	
  Washington,	
  
DC	
  

	
  Swap	
   	
  1.097%	
   	
  

	
  Swap	
   	
  0.540%	
   	
  

September	
  29,	
  
2011	
  
February	
  1,	
  
2012	
  

September	
  29,	
  
2015	
  
February	
  1,	
  
2015	
  

Hotel	
  373,	
  New	
  York,	
  NY	
  *	
  

	
  Cap	
  

	
  2.000%	
   	
  

	
   May	
  24,	
  2012	
   	
   June	
  1,	
  2015	
  

$	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  30,000	
  	
   	
  $	
  

	
   (174)	
   	
  $	
  

	
   (374)	
  

	
   26,639	
  	
   	
   	
  

	
   (8)	
   	
   	
  

	
   (88)	
  

	
   18,356	
  	
   	
   	
  

	
   -‐	
   	
   	
  

	
   1	
  	
  

Courtyard,	
  Miami,	
  FL	
  

	
  Swap	
   	
  0.820%	
   	
  

	
   July	
  2,	
  2012	
  

	
   July	
  1,	
  2016	
  

	
   60,000	
  	
   	
   	
  

	
   (218)	
   	
   	
  

	
   (354)	
  

Subordinated	
  Notes	
  Payable	
  

	
  Cap	
  

	
  2.000%	
   	
  

Unsecured	
  Term	
  Loan	
  

Unsecured	
  Term	
  Loan	
  
Hyatt,	
  Union	
  Square,	
  New	
  
York,	
  NY	
  
Duane	
  Street	
  Hotel,	
  New	
  York,	
  
NY	
  
Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
  
New	
  York,	
  NY	
  
Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
  
New	
  York,	
  NY	
  

	
  Swap	
   	
  0.545%	
   	
  

	
  Swap	
   	
  0.600%	
   	
  

	
  Cap	
  

	
  2.000%	
   	
  

	
  Swap	
   	
  0.933%	
   	
  

	
  Cap	
  

	
  1.100%	
   	
  

	
  Swap	
   	
  1.152%	
   	
  

	
   July	
  30,	
  2012	
  
November	
  5,	
  
2012	
  
December	
  18,	
  
2012	
  

	
   April	
  9,	
  2013	
  
February	
  1,	
  
2014	
  

	
   July	
  30,	
  2014	
  
November	
  5,	
  
2016	
  
November	
  5,	
  
2016	
  

	
   April	
  9,	
  2016	
  
February	
  1,	
  
2017	
  

	
   May	
  27,	
  2014	
   	
   June	
  1,	
  2015	
  
February	
  21,	
  
2017	
  

	
   June	
  1,	
  2015	
  

	
   51,548	
  	
   	
   	
  

	
   -‐	
   	
   	
  

	
   -‐	
  

	
   100,000	
  	
   	
   	
  

	
   272	
  	
   	
   	
  

	
   430	
  	
  

	
   50,000	
  	
   	
   	
  

	
   85	
  	
   	
   	
  

	
   137	
  	
  

	
   55,000	
  	
   	
   	
  

	
   9	
  	
   	
   	
  

	
   76	
  	
  

	
   9,352	
  	
   	
   	
  

	
   (29)	
   	
   	
  

	
   45,000	
  	
   	
   	
  

	
   -‐	
   	
   	
  

	
   45,000	
  	
   	
   	
  
	
   	
  $	
  

	
   (149)	
   	
   	
  
	
   (212)	
   	
  $	
  

	
   -‐	
  

	
   -‐	
  

	
   -‐	
  

	
   (172)	
  

1-‐Month	
  LIBOR	
  +	
  
3.85%	
  
1-‐Month	
  LIBOR	
  +	
  
3.25%	
  
1-‐Month	
  LIBOR	
  +	
  
3.85%	
  
1-‐Month	
  LIBOR	
  +	
  
3.50%	
  
1-‐Month	
  LIBOR	
  +	
  
3.00%	
  
1-‐Month	
  LIBOR	
  +	
  
2.40%	
  
1-‐Month	
  LIBOR	
  +	
  
2.40%	
  
1-‐Month	
  LIBOR	
  +	
  
4.19%	
  
1-‐Month	
  LIBOR	
  +	
  
4.50%	
  
1-‐Month	
  LIBOR	
  +	
  
2.90%	
  
1-‐Month	
  LIBOR	
  +	
  
2.90%	
  

*	
  

On	
  April	
  30,	
  2014,	
  we	
  sold	
  Hotel	
  373,	
  New	
  York,	
  NY,	
  and	
  therefore,	
  terminated	
  the	
  interest	
  rate	
  cap	
  
associated	
  with	
  the	
  mortgage	
  on	
  this	
  property.	
  As	
  a	
  result	
  of	
  this	
  termination,	
  we	
  expensed	
  $55	
  in	
  fees,	
  
which	
  are	
  included	
  in	
  the	
  gain	
  on	
  disposition	
  of	
  hotel	
  properties.	
   	
  

On	
  January	
  31,	
  2014,	
  we	
  entered	
  into	
  an	
  interest	
  rate	
  swap	
  that	
  effectively	
  fixes	
  interest	
  payments	
  at	
  5.433%	
  on	
  a	
  
variable	
  rate	
  mortgage	
  on	
  the	
  Duane	
  Street	
  Hotel.	
  See	
  “Note	
  5	
  –	
  Debt”	
  for	
  more	
  information	
  on	
  the	
  interest	
  rate	
  
swap.	
   	
  

On	
  May	
  27,	
  2014,	
  we	
  entered	
  into	
  an	
  interest	
  rate	
  cap	
  that	
  effectively	
  fixes	
  interest	
  payments	
  when	
  1	
  month-‐U.S.	
  
dollar	
  LIBOR	
  exceeds	
  1.10%	
  on	
  a	
  variable	
  rate	
  mortgage	
  on	
  the	
  Hilton	
  Garden	
  Inn	
  52nd	
  Street,	
  New	
  York,	
  NY.	
  The	
  
notional	
  amount	
  of	
  the	
  interest	
  rate	
  cap	
  is	
  $45,000	
  and	
  equals	
  the	
  principal	
  of	
  the	
  variable	
  rate	
  mortgage	
  being	
  
hedged.	
  This	
  interest	
  rate	
  cap	
  matures	
  on	
  June	
  1,	
  2015.	
  Upon	
  maturity	
  of	
  the	
  interest	
  rate	
  cap,	
  an	
  interest	
  rate	
  
swap	
  will	
  go	
  into	
  effect	
  that	
  effectively	
  fixes	
  the	
  interest	
  payment	
  at	
  4.052%.	
  

The	
  fair	
  value	
  of	
  certain	
  swaps	
  and	
  our	
  interest	
  rate	
  caps	
  is	
  included	
  in	
  other	
  assets	
  at	
  December	
  31,	
  2014	
  and	
  
December	
  31,	
  2013	
  and	
  the	
  fair	
  value	
  of	
  certain	
  of	
  our	
  interest	
  rate	
  swaps	
  is	
  included	
  in	
  accounts	
  payable,	
  accrued	
  
expenses	
  and	
  other	
  liabilities	
  at	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013.	
  

The	
  net	
  change	
  in	
  fair	
  value	
  of	
  derivative	
  instruments	
  designated	
  as	
  cash	
  flow	
  hedges	
  was	
  a	
  gain	
  of	
  $18	
  and	
  a	
  gain	
  
of	
  $1,410,	
  and	
  a	
  loss	
  of	
  $635	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  These	
  
unrealized	
  gains	
  and	
  losses	
  were	
  reflected	
  on	
  our	
  consolidated	
  balance	
  sheet	
  in	
  accumulated	
  other	
  comprehensive	
  
income.	
  

Amounts	
  reported	
  in	
  accumulated	
  other	
  comprehensive	
  income	
  related	
  to	
  derivatives	
  will	
  be	
  reclassified	
  to	
  
interest	
  expense	
  as	
  interest	
  payments	
  are	
  made	
  on	
  the	
  Company’s	
  variable-‐rate	
  derivative.	
  The	
  change	
  in	
  net	
  

72 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   
	
   
	
   
	
   
	
   
 
	
     
	
     
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
  	
  
	
   	
  	
  
	
   	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  7	
  –	
  FAIR	
  VALUE	
  MEASUREMENTS	
  AND	
  DERIVATIVE	
  INSTRUMENTS	
  (CONTINUED)	
  

unrealized	
  gains/losses	
  on	
  cash	
  flow	
  hedges	
  reflects	
  a	
  reclassification	
  of	
  $1,509	
  of	
  net	
  unrealized	
  gains/losses	
  from	
  
accumulated	
  other	
  comprehensive	
  income	
  as	
  an	
  increase	
  to	
  interest	
  expense	
  during	
  2014.	
  During	
  2015,	
  the	
  
Company	
  estimates	
  that	
  an	
  additional	
  $1,113	
  will	
  be	
  reclassified	
  as	
  an	
  increase	
  to	
  interest	
  expense.	
  

Fair	
  Value	
  of	
  Debt	
  

The	
  Company	
  estimates	
  the	
  fair	
  value	
  of	
  its	
  fixed	
  rate	
  debt	
  and	
  the	
  credit	
  spreads	
  over	
  variable	
  market	
  rates	
  on	
  its	
  
variable	
  rate	
  debt	
  by	
  discounting	
  the	
  future	
  cash	
  flows	
  of	
  each	
  instrument	
  at	
  estimated	
  market	
  rates	
  or	
  credit	
  
spreads	
  consistent	
  with	
  the	
  maturity	
  of	
  the	
  debt	
  obligation	
  with	
  similar	
  credit	
  policies.	
  Credit	
  spreads	
  take	
  into	
  
consideration	
  general	
  market	
  conditions	
  and	
  maturity.	
  The	
  inputs	
  utilized	
  in	
  estimating	
  the	
  fair	
  value	
  of	
  debt	
  are	
  
classified	
  in	
  Level	
  2	
  of	
  the	
  fair	
  value	
  hierarchy.	
  	
  As	
  of	
  December	
  31,	
  2014,	
  the	
  carrying	
  value	
  and	
  estimated	
  fair	
  
value	
  of	
  the	
  Company’s	
  debt	
  were	
  $918,923	
  and	
  $916,877,	
  respectively.	
  	
  As	
  of	
  December	
  31,	
  2013,	
  the	
  carrying	
  
value	
  and	
  estimated	
  fair	
  value	
  of	
  the	
  Company’s	
  debt	
  were	
  $819,336	
  and	
  $828,974,	
  respectively.	
  

Impaired	
  Hotel	
  Property	
  

As	
  discussed	
  in	
  “Note	
  12-‐Discontinued	
  Operations,”	
  the	
  Company	
  recorded	
  an	
  impairment	
  loss	
  for	
  the	
  year	
  ended	
  
December	
  31,	
  2013	
  of	
  approximately	
  $3,723	
  for	
  the	
  Holiday	
  Inn	
  Express	
  Camp	
  Springs,	
  MD	
  for	
  which	
  the	
  
anticipated	
  net	
  proceeds	
  from	
  the	
  sale	
  of	
  the	
  hotel	
  did	
  not	
  exceed	
  the	
  carrying	
  value.	
   	
   The	
  fair	
  value	
  of	
  the	
  hotel	
  
was	
  estimated	
  using	
  level	
  2	
  inputs.	
  

As	
  discussed	
  in	
  “Note	
  12-‐Discontinued	
  Operations,”	
  the	
  Company	
  recorded	
  an	
  impairment	
  loss	
  for	
  the	
  year	
  ended	
  
December	
  31,	
  2013	
  of	
  approximately	
  $6,591	
  for	
  the	
  non-‐core	
  hotel	
  portfolio	
  the	
  Company	
  was	
  under	
  contract	
  to	
  
sell	
  for	
  which	
  the	
  anticipated	
  net	
  proceeds	
  did	
  not	
  exceed	
  the	
  carrying	
  value.	
   	
   The	
  fair	
  value	
  of	
  the	
  non-‐core	
  hotel	
  
portfolio	
  was	
  estimated	
  using	
  level	
  2	
  inputs.	
  

73 

	
  
	
  
	
  
	
  
	
  
	
  
  
 
 
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  8	
  –	
  SHARE	
  BASED	
  PAYMENTS	
  

In	
  May	
  2011,	
  the	
  Company	
  established	
  and	
  our	
  shareholders	
  approved	
  the	
  Hersha	
  Hospitality	
  Trust	
  2012	
  Equity	
  
Incentive	
  Plan	
  (the	
  “2012	
  Plan”)	
  for	
  the	
  purpose	
  of	
  attracting	
  and	
  retaining	
  executive	
  officers,	
  employees,	
  trustees	
  
and	
  other	
  persons	
  and	
  entities	
  that	
  provide	
  services	
  to	
  the	
  Company.	
   	
   	
  

Executives	
  &	
  Employees	
  

Annual	
  Long	
  Term	
  Equity	
  Incentive	
  Programs	
  

To	
  further	
  align	
  the	
  interests	
  of	
  the	
  Company’s	
  executives	
  with	
  those	
  of	
  shareholders,	
  the	
  Compensation	
  
Committee	
  grants	
  annual	
  long	
  term	
  equity	
  incentive	
  awards	
  that	
  are	
  both	
  “performance	
  based”	
  and	
  “time	
  based.”	
   	
  
The	
  following	
  table	
  is	
  a	
  summary	
  of	
  all	
  share	
  awards	
  issued	
  to	
  executives	
  under	
  the	
  Annual	
  LTIPs:	
  

Original	
  Issuance	
  
Date	
  

Shares	
  
Issued	
  

Share	
  Price	
  
on	
  date	
  of	
  
grant	
  

Vesting	
  
Period	
  

Vesting	
  
Schedule	
  

December	
  23,	
  
2014	
  

	
   December	
  31,	
  
2013	
  

	
   December	
  
31,	
  2014	
  

	
   December	
  
31,	
  2013	
  

Shares	
  Vested	
  (2)	
  

Unearned	
  Compensation	
  (2)	
  

March	
  21,	
  2014	
  
(2013	
  Annual	
  
LTIP)	
  

March	
  20,	
  2013	
  
(2012	
  Annual	
  
LTIP)	
  

March	
  26,	
  2012	
  

(2011	
  Annual	
  
LTIP)	
  

	
   	
   447,959	
  	
   	
   $	
  

	
   5.80	
  	
   	
   3	
  years	
   	
   25%/year	
  (1)	
   	
  

	
   111,988	
  	
   	
  

	
   -‐	
  	
   $	
  

	
   -‐	
   	
   $	
  

	
   -‐	
  

	
   779,045	
  	
  	
   $	
  

	
   5.95	
  	
  	
   3	
  years	
   	
   25%/year	
  (1)	
  	
  

	
   389,520	
  	
  	
  

	
   389,520	
  	
  	
  

	
   -‐	
  	
  

	
   1,039	
  	
  

	
   748,927	
  	
  	
   $	
  

	
   5.45	
  	
  	
   3	
  years	
   	
   25%/year	
  (1)	
  	
  

	
   561,694	
  	
  	
  

	
   561,694	
  	
  	
  

	
   1,063,202	
  	
  	
  

	
   951,214	
  	
  	
   $	
  

	
   -‐	
  	
  

	
   -‐	
  	
   $	
  

	
   266	
  	
  

	
   1,305	
  	
  

(1)	
  

(2)	
  

25%	
  of	
  the	
  issued	
  shares	
  vested	
  immediately	
  upon	
  issuance.	
   	
   In	
  general,	
  the	
  remaining	
  shares	
  vest	
  25%	
  
on	
  the	
  first	
  through	
  third	
  anniversaries	
  of	
  the	
  date	
  of	
  effective	
  issuance	
  (subject	
  to	
  continuous	
  
employment	
  through	
  the	
  applicable	
  vesting	
  date).	
  

All	
  of	
  the	
  unvested	
  shares	
  issued	
  as	
  part	
  of	
  the	
  Annual	
  LTIP	
  plans	
  noted	
  above	
  were	
  forfeited	
  on	
  
December	
  23,	
  2014,	
  and	
  concurrently	
  issued	
  as	
  LTIP	
  Units.	
   	
   See	
  below	
  for	
  more	
  information.	
  

Stock	
  based	
  compensation	
  expense	
  related	
  to	
  the	
  Annual	
  LTIP	
  Plans	
  of	
  $2,987,	
  $3,762,	
  and	
  $3,925	
  was	
  incurred	
  
during	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
   	
   Unearned	
  compensation	
  related	
  to	
  
the	
  Annual	
  LTIPs	
  as	
  of	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  was	
  $0	
  and	
  $1,305,	
  respectively.	
  

LTIP	
  Units	
  

On	
  December	
  23,	
  2014,	
  the	
  2012	
  Plan	
  was	
  amended	
  and	
  restated	
  to	
  add	
  LTIP	
  Units	
  as	
  a	
  type	
  of	
  award	
  available	
  
under	
  the	
  2012	
  Plan.	
   	
   On	
  this	
  date,	
  the	
  Compensation	
  Committee	
  approved	
  an	
  aggregate	
  of	
  1,948,324	
  LTIP	
  Units	
  
to	
  certain	
  executive	
  officers.	
   	
   These	
  executive	
  officers	
  forfeited	
  an	
  aggregate	
  of	
  1,948,324	
  Class	
  A	
  Common	
  
Shares,	
  all	
  of	
  which	
  were	
  unvested	
  as	
  of	
  the	
  grant	
  date	
  of	
  the	
  LTIP	
  Units	
  and	
  previously	
  awarded	
  to	
  the	
  executive	
  
officers	
  under	
  the	
  2012	
  Plan	
  as	
  restricted	
  stock	
  awards.	
   	
   The	
  LTIP	
  Units	
  granted	
  on	
  December	
  23,	
  2014	
  are	
  
subject	
  to	
  the	
  same	
  time-‐based	
  vesting	
  conditions	
  that	
  applied	
  to	
  the	
  forfeited	
  restricted	
  stock	
  awards.	
  

74 

 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  8	
  –	
  SHARE	
  BASED	
  PAYMENTS	
  (CONTINUED)	
  

The	
  following	
  table	
  is	
  a	
  summary	
  of	
  the	
  LTIP	
  Units	
  issued	
  to	
  executive	
  officers	
  as	
  of	
  December	
  31,	
  2014.:	
  

Issuance	
  Date	
  

December	
  23,	
  2014	
  

(2013	
  Annual	
  LTIP)	
  

December	
  23,	
  2014	
  

(2012	
  Annual	
  LTIP)	
  

December	
  23,	
  2014	
  

(2011	
  Annual	
  LTIP)	
  

December	
  23,	
  2014	
  

LTIP	
  Units	
  
Issued	
  

Vesting	
  
Period	
  

Vesting	
  Schedule	
  

Units	
  Vested	
  

Unearned	
  
Compensation	
  

December	
  31,	
  2014	
  

	
   335,972	
  	
   	
  

3	
  years	
  

25%/year	
  (1)	
  

	
   111,991	
  	
   	
   $	
  

	
   389,524	
  	
  	
  

3	
  years	
  

25%/year	
  (1)	
  

	
   194,761	
  	
  	
  

	
   187,233	
  	
  	
  

3	
  years	
  

25%/year	
  (1)	
  

	
   1,035,595	
  	
  	
  

5	
  years	
  

33%	
  Year	
  3,	
  4,	
  5	
  (2)	
  

	
   1,948,324	
  	
  	
  

	
   187,233	
  	
  	
  

	
   -‐	
  	
  

	
   493,985	
  	
  	
  

$	
  

	
   582	
  	
  

	
   309	
  	
  

	
   -‐	
  

	
   2,650	
  	
  

	
   3,541	
  	
  

(1)	
  

(2)	
  

As	
  noted	
  above,	
  the	
  vesting	
  schedule	
  for	
  each	
  of	
  the	
  Annual	
  LTIP	
  Plans	
  remains	
  intact	
  with	
  the	
  conversion	
  
to	
  LTIP	
  Units.	
  

On	
  April	
  18,	
  2012,	
  the	
  Company	
  entered	
  into	
  amended	
  and	
  restated	
  employment	
  agreements	
  with	
  the	
  
Company’s	
  executive	
  officers.	
  	
  To	
  induce	
  the	
  executives	
  to	
  agree	
  to	
  the	
  substantial	
  reduction	
  in	
  benefits	
  
upon	
  certain	
  terminations	
  following	
  a	
  change	
  of	
  control	
  as	
  described	
  in	
  the	
  agreements,	
  the	
  Company	
  
awarded	
  an	
  aggregate	
  of	
  1,035,595	
  restricted	
  common	
  shares	
  to	
  the	
  executives	
  pursuant	
  to	
  the	
  2012	
  
Plan.	
  	
  None	
  of	
  these	
  restricted	
  common	
  shares	
  will	
  vest	
  prior	
  to	
  the	
  third	
  anniversary	
  of	
  the	
  date	
  of	
  
issuance.	
  	
  Thereafter,	
  33.3%	
  of	
  each	
  award	
  of	
  restricted	
  common	
  shares	
  will	
  vest	
  on	
  each	
  of	
  the	
  third,	
  
fourth	
  and	
  fifth	
  anniversaries	
  of	
  the	
  date	
  of	
  issuance.	
  	
  Vesting	
  will	
  accelerate	
  upon	
  a	
  change	
  of	
  control	
  or	
  
if	
  the	
  relevant	
  executive’s	
  employment	
  with	
  the	
  Company	
  were	
  to	
  terminate	
  for	
  any	
  reason	
  other	
  than	
  
for	
  cause	
  (as	
  defined	
  in	
  the	
  agreements).	
  

Multi-‐Year	
  LTIP	
  

On	
  April	
  11,	
  2014,	
  the	
  Compensation	
  Committee	
  approved	
  the	
  2014	
  Multi-‐Year	
  LTIP.	
  The	
  common	
  shares	
  issuable	
  
under	
  this	
  program	
  are	
  based	
  on	
  the	
  Company’s	
  achievement	
  of	
  a	
  certain	
  level	
  of	
  (1)	
  absolute	
  total	
  shareholder	
  
return	
  (37.50%	
  of	
  the	
  award),	
  (2)	
  relative	
  total	
  shareholder	
  return	
  as	
  compared	
  to	
  the	
  Company’s	
  peer	
  group	
  
(37.50%	
  of	
  the	
  award),	
  and	
  (3)	
  relative	
  growth	
  in	
  revenue	
  per	
  available	
  room	
  compared	
  to	
  the	
  Company’s	
  peer	
  
group	
  (25%	
  of	
  the	
  award).	
  This	
  program	
  has	
  a	
  three-‐year	
  performance	
  period	
  which	
  commenced	
  on	
  January	
  1,	
  
2014	
  and	
  ends	
  December	
  31,	
  2016.	
  As	
  of	
  December	
  31,	
  2014	
  no	
  common	
  shares	
  have	
  been	
  issued	
  in	
  accordance	
  
with	
  the	
  2014	
  Plan	
  to	
  the	
  executive	
  officers	
  in	
  settlement	
  of	
  2014	
  Multi-‐Year	
  LTIP	
  awards.	
  

On	
  April	
  15,	
  2013,	
  the	
  Compensation	
  Committee	
  approved	
  the	
  2013	
  Multi-‐Year	
  LTIP.	
  The	
  common	
  shares	
  issuable	
  
under	
  this	
  program	
  are	
  based	
  on	
  the	
  Company’s	
  achievement	
  of	
  a	
  certain	
  level	
  of	
  (1)	
  absolute	
  total	
  shareholder	
  
return	
  (50%	
  of	
  the	
  award),	
  (2)	
  relative	
  total	
  shareholder	
  return	
  as	
  compared	
  to	
  the	
  Company’s	
  peer	
  group	
  (25%	
  of	
  
the	
  award),	
  and	
  (3)	
  relative	
  growth	
  in	
  revenue	
  per	
  available	
  room	
  compared	
  to	
  the	
  Company’s	
  peer	
  group	
  (25%	
  of	
  
the	
  award).	
  This	
  program	
  has	
  a	
  three	
  year	
  performance	
  period	
  which	
  commenced	
  on	
  January	
  1,	
  2013	
  and	
  ends	
  
December	
  31,	
  2015.	
  As	
  of	
  December	
  31,	
  2014	
  no	
  common	
  shares	
  have	
  been	
  issued	
  in	
  accordance	
  with	
  the	
  2013	
  
Plan	
  to	
  the	
  executive	
  officers	
  in	
  settlement	
  of	
  2013	
  Multi-‐Year	
  LTIP	
  awards.	
  

The	
  Company	
  accounts	
  for	
  the	
  total	
  shareholder	
  return	
  components	
  of	
  these	
  grants	
  as	
  market-‐based	
  awards	
  
where	
  the	
  Company	
  estimates	
  unearned	
  compensation	
  at	
  the	
  grant	
  date	
  fair	
  value	
  which	
  is	
  then	
  amortized	
  into	
  
compensation	
  cost	
  over	
  the	
  vesting	
  period	
  of	
  each	
  individual	
  plan.	
  The	
  Company	
  accounts	
  for	
  the	
  RevPAR	
  
component	
  of	
  the	
  grants	
  as	
  performance-‐based	
  awards.	
  

75 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  8	
  –	
  SHARE	
  BASED	
  PAYMENTS	
  (CONTINUED)	
  

Stock	
  based	
  compensation	
  expense	
  of	
  $598,	
  $3,481	
  and	
  $3,192	
  was	
  recorded	
  for	
  the	
  years	
  ended	
  December	
  31,	
  
2014,	
  2013,	
  and	
  2012,	
  respectively,	
  for	
  the	
  Multi-‐Year	
  LTIPs.	
  	
  Unearned	
  compensation	
  related	
  to	
  the	
  Multi	
  Year	
  
LTIPs	
  as	
  of	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013,	
  respectively,	
  was	
  $1,621	
  and	
  $1,157.	
  

Restricted	
  Share	
  Awards	
  

In	
  addition	
  to	
  stock	
  based	
  compensation	
  expense	
  related	
  to	
  awards	
  under	
  the	
  Multi-‐Year	
  LTIPs	
  and	
  Annual	
  LTIPs,	
  
stock	
  based	
  compensation	
  expense	
  related	
  to	
  restricted	
  common	
  shares	
  issued	
  to	
  executives	
  and	
  employees	
  of	
  
the	
  Company	
  of	
  $1,495,	
  $1,618,	
  and	
  $1,911	
  was	
  incurred	
  during	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  
2012	
  respectively.	
  	
  Unearned	
  compensation	
  related	
  to	
  the	
  restricted	
  share	
  awards	
  as	
  of	
  December	
  31,	
  2014	
  and	
  
December	
  31,	
  2013	
  was	
  $322	
  and	
  $4,102,	
  respectively.	
  	
  The	
  following	
  table	
  is	
  a	
  summary	
  of	
  all	
  unvested	
  share	
  
awards	
  issued	
  to	
  executives	
  under	
  the	
  2012	
  Plan	
  and	
  prior	
  
equity	
  incentive	
  plans:	
  

Original	
  Issuance	
  
Date	
  
July	
  15,	
  2014	
  
June	
  23,	
  2014	
  
March	
  24,	
  2014	
  
February	
  13,	
  2014	
  
September	
  20,	
  2013	
  	
  
June	
  28,	
  2013	
  
June	
  29,	
  2012	
  

Shares	
  
Issued	
  
	
   52,077	
  	
  	
  
	
   4,411	
  	
  	
  
	
   8,184	
  	
  	
  
	
   1,846	
  	
  	
  
	
   4,605	
  	
  	
  
	
   48,600	
  	
  	
  
	
   52,703	
  	
  	
  

April	
  18,	
  2012	
  
June	
  30,	
  2011	
  

	
   	
   1,035,595	
  	
  	
  
	
   17,692	
  	
  	
  
Total	
  	
   	
   1,225,713	
  	
  	
  

Share	
  
Price	
  on	
  
Date	
  of	
  
Grant	
  
	
   6.75	
  	
  
	
   6.50	
  	
  
	
   5.69	
  	
  
	
   5.44	
  	
  
	
   5.52	
  	
  
	
   5.64	
  	
  
	
   5.28	
  	
  

	
   5.47	
  	
  
	
   5.57	
  	
  

Vesting	
  
Period	
  
2	
  years	
   	
  
2	
  years	
   	
  
2	
  years	
   	
  
2	
  years	
   	
  
	
   2-‐4	
  years	
  	
  
	
   2-‐4	
  years	
  	
  
	
   2-‐4	
  years	
  	
  

Vesting	
  
Schedule	
  
50%	
  /year	
  
50%	
  /year	
  
50%	
  /year	
  
50%	
  /year	
  
25-‐50%	
  /year	
  
25-‐50%	
  /year	
  
25-‐50%	
  /year	
  
5	
  years	
   	
   33%	
  Year	
  3,	
  4,	
  5	
  
(1)	
  
25-‐50%	
  /year	
  

	
   2-‐4	
  years	
  	
  

Shares	
  Vested	
  

Unearned	
  Compensation	
  

	
   December	
  
31,	
  2014	
  

	
   December	
  
31,	
  2013	
  

	
   December	
  
31,	
  2014	
  

	
   December	
  
31,	
  2013	
  

	
   6,126	
  	
  	
  
	
   -‐	
  	
  
	
   4,091	
  	
  	
  
	
   923	
  	
  	
  
	
   4,605	
  	
  	
  
	
   22,895	
  	
  	
  
	
   44,967	
  	
  	
  

	
   -‐	
  	
  
	
   13,804	
  	
  	
  
97,411	
  	
  

	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   22,480	
  	
  	
  

	
   177	
  	
  	
  
	
   20	
  	
  	
  
	
   10	
  	
  	
  
	
   2	
  	
  	
  
	
   -‐	
  	
  
	
   69	
  	
  	
  
	
   36	
  	
  	
  

	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   -‐	
  
	
   19	
  	
  
	
   199	
  	
  
	
   110	
  	
  

	
   -‐	
  	
  
	
   9,919	
  	
  	
  
32,399	
  	
   $	
  

	
   -‐	
  	
  
	
   8	
  	
  	
  
	
   322	
  	
  	
   $	
  

	
   3,746	
  	
  
	
   28	
  	
  
	
   4,102	
  	
  

(1)	
  

As	
  noted	
  above,	
  the	
  unvested	
  shares	
  associated	
  with	
  this	
  issuance	
  were	
  forfeited	
  and	
  immediately	
  issued	
  
as	
  LTIP	
  Units	
  on	
  December	
  23,	
  2014.	
   	
   The	
  historical	
  information	
  pertaining	
  to	
  the	
  unvested	
  shares	
  before	
  
the	
  conversion	
  is	
  shown	
  this	
  table.	
  

Trustees	
  

Annual	
  Retainer	
  

The	
  Compensation	
  Committee	
  approved	
  a	
  program	
  that	
  allows	
  the	
  Company’s	
  trustees	
  to	
  make	
  a	
  voluntary	
  
election	
  to	
  receive	
  any	
  portion	
  of	
  the	
  annual	
  cash	
  retainer	
  in	
  the	
  form	
  of	
  common	
  equity	
  valued	
  at	
  a	
  25%	
  premium	
  
to	
  the	
  cash	
  that	
  would	
  have	
  been	
  received.	
  	
  On	
  December	
  30,	
  2014,	
  we	
  issued	
  12,860	
  shares	
  which	
  do	
  not	
  fully	
  
vest	
  until	
  December	
  31,	
  2015.	
  	
  Compensation	
  expense	
  incurred	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  
2012,	
  respectively,	
  was	
  $220,	
  $160,	
  and	
  $66.	
  	
  	
  

The	
  following	
  table	
  is	
  a	
  summary	
  of	
  all	
  unvested	
  share	
  awards	
  issued	
  to	
  trustees	
  in	
  lieu	
  of	
  annual	
  cash	
  retainer:	
  

Original	
  Issuance	
  Date	
   	
  
December	
  30,	
  2014	
   	
  
December	
  27,	
  2013	
   	
  
Total	
  	
  

Shares	
  
Issued	
  
	
   12,860	
  	
   	
   $	
  
	
   39,133	
  	
   	
   	
  

	
   51,993	
  	
  	
  

Share	
  Price	
  on	
  
Date	
  of	
  Grant	
  

	
   7.25	
  	
   	
  
	
   5.63	
  	
   	
  

Vesting	
  
Period	
  
1	
  year	
  
1	
  year	
  

Vesting	
  
Schedule	
  
100%	
  
100%	
  

	
   $	
  

Unearned	
  Compensation	
  

	
   December	
  31,	
  
2014	
  

	
   December	
  31,	
  
2013	
  

	
   93	
  	
   	
   $	
  
	
   -‐	
   	
   	
  

	
   93	
  	
  	
  

	
   -‐	
  
	
   220	
  	
  

	
   220	
  	
  

76 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  8	
  –	
  SHARE	
  BASED	
  PAYMENTS	
  (CONTINUED)	
  

Multi-‐Year	
  Long-‐Term	
  Equity	
  Incentives	
  

Compensation	
  expense	
  for	
  the	
  multi-‐year	
  long	
  term	
  incentive	
  plans	
  for	
  the	
  Company’s	
  trustees	
  incurred	
  for	
  the	
  
years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively,	
  was	
  $71,	
  $55,	
  and	
  $43.	
  	
  Unearned	
  compensation	
  
related	
  to	
  the	
  multi-‐year	
  long	
  term	
  equity	
  incentives	
  was	
  $127	
  and	
  $124	
  as	
  of	
  December	
  31,	
  2014	
  and	
  December	
  
31,	
  2013,	
  respectively.	
  

The	
  following	
  table	
  is	
  a	
  summary	
  of	
  all	
  unvested	
  share	
  awards	
  issued	
  to	
  trustees	
  under	
  the	
  2012	
  Plan	
  and	
  prior	
  to	
  
equity	
  incentive	
  plans:	
  

Original	
  Issuance	
  
Date	
  
December	
  30,	
  2014	
  
December	
  27,	
  2013	
  
December	
  28,	
  2012	
  	
  
June	
  5,	
  2012	
  

Shares	
  
Issued	
  
	
   10,000	
  	
   	
  
	
   12,000	
  	
   	
  
	
   12,000	
  	
  	
  
	
   10,800	
  	
  	
  

Vesting	
  
Period	
  
	
   3	
  years	
  
	
   3	
  years	
  
3	
  years	
   	
  
3	
  years	
   	
  

Vesting	
  
Schedule	
  
	
   33%	
  /year	
  
	
   33%	
  /year	
  

33%	
  /year	
   	
  
33%	
  /year	
   	
  

Shares	
  Vested	
  

Unearned	
  Compensation	
  

	
   December	
  31,	
  
2014	
  

	
   December	
  31,	
  
2013	
  

	
   December	
  31,	
  
2014	
  

	
   December	
  31,	
  
2013	
  

	
   -‐	
   	
  
	
   5,335	
  	
   	
  
	
   8,670	
  	
  	
  
	
   10,800	
  	
  	
  
	
   24,805	
  	
  	
  

	
   -‐	
  	
   $	
  
	
   -‐	
  	
  
	
   4,002	
  	
  	
  
	
   7,200	
  	
  	
  
	
   11,202	
  	
  	
   $	
  

	
   73	
  	
   	
   $	
  
	
   38	
  	
   	
   	
  
	
   16	
  	
  	
  
	
   -‐	
  	
  
	
   127	
  	
  	
   $	
  

	
   -‐	
  
	
   67	
  	
  
	
   39	
  	
  
	
   18	
  	
  
	
   124	
  	
  

Share	
  Awards	
  

Compensation	
  expense	
  related	
  to	
  share	
  awards	
  issued	
  to	
  the	
  Board	
  of	
  Trustees	
  of	
  $457,	
  $496	
  and	
  $402	
  was	
  
incurred	
  during	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively	
  and	
  is	
  recorded	
  in	
  general	
  and	
  
administrative	
  expense	
  on	
  the	
  statement	
  of	
  operations.	
  Share	
  awards	
  issued	
  to	
  the	
  Board	
  of	
  Trustees	
  are	
  
immediately	
  vested.	
  On	
  June	
  23,	
  2014	
  an	
  aggregate	
  47,475	
  shares	
  were	
  issued	
  to	
  the	
  Board	
  of	
  Trustees	
  at	
  a	
  price	
  
per	
  share	
  on	
  the	
  date	
  of	
  grant	
  of	
  $6.50.	
   	
   On	
  December	
  30,	
  2014,	
  an	
  aggregate	
  20,500	
  shares	
  were	
  issued	
  to	
  the	
  
Board	
  of	
  Trustees	
  at	
  a	
  price	
  per	
  share	
  on	
  the	
  date	
  of	
  grant	
  of	
  $7.25.	
  

Non-‐employees	
  

The	
  Company	
  issues	
  share	
  based	
  awards	
  as	
  compensation	
  to	
  non-‐employees	
  for	
  services	
  provided	
  to	
  the	
  Company	
  
consisting	
  primarily	
  of	
  restricted	
  common	
  shares.	
  	
  The	
  Company	
  recorded	
  stock	
  based	
  compensation	
  expense	
  of	
  
$200,	
  $174,	
  and	
  $139	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  	
  Unearned	
  
compensation	
  related	
  to	
  the	
  restricted	
  share	
  awards	
  as	
  of	
  December	
  31,	
  2014	
  and	
  December	
  31,	
  2013	
  was	
  $81	
  
and	
  $81,	
  respectively.	
  The	
  following	
  table	
  is	
  a	
  summary	
  of	
  all	
  unvested	
  share	
  awards	
  issued	
  to	
  non-‐employees	
  
under	
  the	
  Company’s	
  2008	
  Equity	
  Incentive	
  Plan	
  and	
  the	
  2012	
  Plan:	
  

Original	
  Issuance	
  Date	
  
March	
  24,	
  2014	
  

Shares	
  
Issued	
  
	
   	
   30,000	
  	
   	
   $	
  

Share	
  Price	
  
on	
  Date	
  of	
  
Grant	
  

Vesting	
  
Period	
  
	
   5.69	
  	
   	
   2	
  years	
  

Vesting	
  
Schedule	
  
	
   50%	
  /year	
   	
  

Shares	
  Vested	
  

Unearned	
  Compensation	
  

	
   December	
  
31,	
  2014	
  

	
   December	
  
31,	
  2013	
  

	
   December	
  
31,	
  2014	
  

	
   December	
  
31,	
  2013	
  

	
   15,000	
  	
   	
  

	
   -‐	
  	
   $	
  

	
   81	
  	
   	
   $	
  

February	
  1,	
  2013	
  

	
   	
   30,000	
  	
  	
   $	
  

	
   5.41	
  	
  	
   2	
  years	
  

	
   50%	
  /year	
  	
  

	
   30,000	
  	
  

	
   14,999	
  	
  

Total	
  	
  

60,000	
  	
  

45,000	
  

14,999	
  

	
  $	
  

	
   -‐	
  

81	
  

	
  $	
  

	
   -‐	
  

	
   81	
  	
  

81	
  

77 

	
  
 
	
  
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
   	
  
	
   	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  	
  
	
  	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
 
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  9	
  –	
  EARNINGS	
  PER	
  SHARE	
  

The	
  following	
  table	
  is	
  a	
  reconciliation	
  of	
  the	
  income	
  or	
  loss	
  (numerator)	
  and	
  the	
  weighted	
  average	
  shares	
  
(denominator)	
  used	
  in	
  the	
  calculation	
  of	
  basic	
  and	
  diluted	
  earnings	
  per	
  common	
  share.	
  The	
  computation	
  of	
  basic	
  
and	
  diluted	
  earnings	
  per	
  share	
  is	
  presented	
  below.	
  

NUMERATOR:	
  

Basic	
  and	
  Diluted*	
  

Income	
  from	
  Continuing	
  Operations	
  

	
   $	
  

	
   69,936	
  	
  

	
   $	
  

	
   20,753	
  	
  	
  

$	
  

	
   7,498	
  	
  	
  

For	
  the	
  Year	
  Ended	
  December	
  31,	
  

2014	
  

2013	
  

2012	
  

(Income)	
  Loss	
  from	
  Continuing	
  Operations	
  allocated	
  to	
  Noncontrolling	
  
Interests	
   	
  

Distributions	
  to	
  Preferred	
  Shareholders	
  

Dividends	
  Paid	
  on	
  Unvested	
  Restricted	
  Shares	
  and	
  LTIP	
  Units	
  
Extinguishment	
  of	
  Issuance	
  Costs	
  Upon	
  Redemption	
  of	
  Series	
  A	
  
Preferred	
  Stock	
  

Income	
  (Loss)	
  from	
  Continuing	
  Operations	
  attributable	
  to	
  Common	
  
Shareholders	
  

Discontinued	
  Operations	
  

	
   (1,069)	
  

	
   (14,356)	
  

	
   658	
  	
  	
  

	
   703	
  	
  	
  

	
   (14,611)	
  	
  

	
   (14,000)	
  	
  

	
   (515)	
  

	
   (804)	
  	
  

	
   (459)	
  	
  

	
   -‐	
  

	
   (2,250)	
  	
  

	
   -‐	
  	
  

	
   53,996	
  	
  

	
   3,746	
  	
  	
  

	
   (6,258)	
  	
  

(Loss)	
  Income	
  from	
  Discontinued	
  Operations	
  

	
   (1,665)	
  

	
   29,195	
  	
  	
  

	
   14,720	
  	
  	
  

Loss	
  (Income)	
  from	
  Discontinued	
  Operations	
  allocated	
  to	
  
Noncontrolling	
  Interests	
   	
  

(Loss)	
  from	
  Discontinued	
  Operations	
  attributable	
  to	
  Common	
  
Shareholders	
  

	
   53	
  	
  

	
   (993)	
  	
  

	
   (545)	
  	
  

	
   (1,612)	
  

	
   28,202	
  	
  	
  

	
   14,175	
  	
  	
  

Net	
  Income	
  attributable	
  to	
  Common	
  Shareholders	
  

	
   $	
  

	
   52,384	
  	
  

	
   $	
  

	
   31,948	
  	
  	
  

$	
  

	
   7,917	
  	
  	
  

DENOMINATOR:	
  

Weighted	
  average	
  number	
  of	
  common	
  shares	
  -‐	
  basic	
  

	
   199,109,209	
  	
  

	
   198,390,450	
  	
  	
  

	
  	
   187,415,270	
  	
  	
  

Effect	
  of	
  dilutive	
  securities:	
  

Restricted	
  Stock	
  Awards	
  (unvested)	
  

Contingently	
  Issued	
  Shares	
  

	
   1,358,603	
  	
  

	
   729,498	
  	
  

	
   2,384,165	
  	
  	
  

	
   1,143,562	
  	
  	
  

	
   -‐	
  *	
  

	
   -‐	
  *	
  

Weighted	
  average	
  number	
  of	
  common	
  shares	
  -‐	
  diluted	
  

	
   201,197,310	
  	
  

	
   201,918,177	
  	
  	
  

	
  	
   187,415,270	
  	
  	
  

Income	
  (loss)	
  allocated	
  to	
  noncontrolling	
  interest	
  in	
  Hersha	
  Hospitality	
  Limited	
  Partnership	
  has	
  been	
  
excluded	
  from	
  the	
  numerator	
  and	
  units	
  of	
  limited	
  partnership	
  interest	
  in	
  Hersha	
  Hospitality	
  Limited	
  
Partnership	
  have	
  been	
  omitted	
  from	
  the	
  denominator	
  for	
  the	
  purpose	
  of	
  computing	
  diluted	
  earnings	
  per	
  
share	
  since	
  the	
  effect	
  of	
  including	
  these	
  amounts	
  in	
  the	
  numerator	
  and	
  denominator	
  would	
  have	
  no	
  
impact.	
  	
  In	
  addition,	
  potentially	
  dilutive	
  common	
  shares,	
  if	
  any,	
  have	
  been	
  excluded	
  from	
  the	
  
denominator	
  if	
  they	
  are	
  anti-‐dilutive	
  to	
  income	
  (loss)	
  from	
  continuing	
  operations	
  applicable	
  to	
  common	
  
shareholders. 

* 

78 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  	
  
	
  
	
  	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
   	
  
	
  
	
  	
   	
  
	
  
	
  	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
 
 
 
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  9	
  –	
  EARNINGS	
  PER	
  SHARE	
  (CONTINUED)	
  

The	
  following	
  table	
  summarizes	
  potentially	
  dilutive	
  securities	
  that	
  have	
  been	
  excluded	
  from	
  the	
  denominator	
  for	
  
the	
  purpose	
  of	
  computing	
  diluted	
  earnings	
  per	
  share: 	
  

Common	
  Units	
  

LTIP	
  Units	
  

Unvested	
  Stock	
  Awards	
  Outstanding	
  

Contingently	
  Issuable	
  Share	
  Awards	
  

Options	
  to	
  Acquire	
  Common	
  Shares	
  Outstanding	
  

Total	
  potentially	
  dilutive	
  securities	
  
excluded	
  from	
  the	
  denominator	
  

For	
  the	
  Year	
  Ended	
  December	
  31,	
  

2014	
  

2013	
  

2012	
  

	
   6,909,649	
  	
  	
  

	
   32,711	
  	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   6,968,035	
  	
  	
  

	
   7,208,123	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  

	
   433,097	
  	
  

	
   2,778,545	
  	
  

	
   275,580	
  	
  

	
   6,942,360	
  	
  	
  

	
   6,968,035	
  	
  	
  

	
   10,695,345	
  	
  

79 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
 
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  10	
  –	
  CASH	
  FLOW	
  DISCLOSURES	
  AND	
  NON	
  CASH	
  INVESTING	
  AND	
  FINANCING	
  ACTIVITIES	
  

Interest	
  paid	
  during	
  2014,	
  2013,	
  and	
  2012	
  totaled	
  $40,760,	
  $42,984,	
  and	
  $41,744	
  respectively.	
  The	
  following	
  
non-‐cash	
  investing	
  and	
  financing	
  activities	
  occurred	
  during	
  2014,	
  2013	
  and	
  2012:	
  

Common	
  Shares	
  issued	
  as	
  part	
  of	
  the	
  Dividend	
  Reinvestment	
  Plan	
  
Acquisition	
  of	
  hotel	
  properties:	
  

Debt	
  assumed	
  

Development	
  loan	
  accrued	
  interest	
  revenue	
  receivable	
  paid	
  in-‐kind	
  by	
  adding	
  
balance	
  to	
  development	
  loan	
  principal	
  

Settlement	
  of	
  development	
  loan	
  receivable	
  principal	
  and	
  accrued	
  interest	
  
revenue	
  receivable	
  
Disposition	
  of	
  hotel	
  properties:	
  

Investment	
  in	
  hotel	
  properties,	
  net,	
  conveyed	
  to	
  mortgage	
  lender	
  
Debt	
  conveyed	
  to	
  mortgage	
  lender	
  
Debt	
  assumed	
  by	
  purchaser	
  

Conversion	
  of	
  Common	
  Units	
  to	
  Common	
  Shares	
  
Reallocation	
  of	
  noncontrolling	
  interest	
  
Accrued	
  payables	
  for	
  fixed	
  assets	
  placed	
  into	
  service	
  

2014	
  

2013	
  

2012	
  

	
   $	
  

	
   50	
  	
   $	
  

	
   38	
  	
   $	
  

	
   24	
  

	
   24,924	
  	
   	
  

	
   -‐	
  	
   	
  

	
   85,913	
  

	
   -‐	
  	
   	
  

	
   -‐	
  	
   	
  

	
   678	
  

	
   22,494	
  	
   	
  

	
   13,303	
  	
   	
  

	
   -‐	
  

	
   -‐	
  	
   	
  
	
   -‐	
  	
   	
  
	
   45,710	
  	
   	
  
	
   72	
  	
   	
  
	
   -‐	
  	
   	
  
	
   1,312	
  	
   	
  

	
   -‐	
  	
   	
  
	
   -‐	
  	
   	
  
	
   -‐	
  	
   	
  
	
   106	
  	
   	
  
	
   -‐	
  	
   	
  
	
   2,572	
  	
   	
  

	
   1,938	
  
	
   2,940	
  
	
   54,217	
  
	
   572	
  
	
   (966)	
  
	
   -‐	
  

80 

 
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
 
 
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  11	
  –	
  HOTEL	
  DISPOSITIONS	
  

Effective	
  January	
  1,	
  2014,	
  we	
  early	
  adopted	
  ASU	
  Update	
  No.	
  2014-‐08	
  concerning	
  the	
  classification	
  and	
  reporting	
  of	
  
discontinued	
  operations.	
  This	
  amendment	
  defines	
  discontinued	
  operations	
  as	
  a	
  component	
  of	
  an	
  entity	
  that	
  
represents	
  a	
  strategic	
  shift	
  that	
  has	
  (or	
  will	
  have)	
  a	
  major	
  effect	
  on	
  an	
  entity’s	
  operations	
  and	
  financial	
  results.	
  As	
  a	
  
result	
  of	
  the	
  early	
  adoption	
  of	
  ASU	
  Update	
  No.	
  2014-‐08,	
  we	
  anticipate	
  that	
  most	
  of	
  our	
  hotel	
  dispositions	
  will	
  not	
  
be	
  classified	
  as	
  discontinued	
  operations	
  as	
  most	
  will	
  not	
  fit	
  this	
  definition.	
  

For	
  transactions	
  that	
  have	
  been	
  classified	
  as	
  held	
  for	
  sale	
  or	
  as	
  discontinued	
  operations	
  for	
  periods	
  prior	
  to	
  our	
  
adoption	
  of	
  ASU	
  Update	
  No.	
  2014-‐08,	
  we	
  will	
  continue	
  to	
  present	
  the	
  operating	
  results	
  as	
  discontinued	
  operations	
  
in	
  the	
  statements	
  of	
  operations	
  for	
  all	
  applicable	
  periods	
  presented.	
  

Disposed	
  Assets	
  

Hotel	
  

Acquisition	
  
Date	
  

Disposition	
  
Date	
  

	
   	
   Consideration	
   	
  	
   	
  

Gain	
  on	
  
Disposition	
   	
  

Hotel	
  373	
  

2014	
  Total	
  

June	
  2007	
  	
  

April	
  2014	
  	
   $	
  

	
   37,000	
  	
  

	
  $	
  

	
  $	
  

Non-‐Core	
  Portfolio	
  II	
  (12)	
  
Holiday	
  Inn	
  Express,	
  Camp	
  Springs,	
  
MD	
  

	
   January	
  1999	
  -‐	
  July	
  2010	
   	
  

December	
  2013	
   	
   $	
  

	
   158,600	
  	
   	
   $	
  

June	
  2008	
   	
  

September	
  2013	
   	
   	
  

	
   8,500	
  	
   	
   	
  

Comfort	
  Inn,	
  Harrisburg,	
  PA	
  

January	
  1999	
   	
  

June	
  2013	
   	
   	
  

	
   3,700	
  	
   	
   	
  

2013	
  Total	
  

Non-‐Core	
  Hotel	
  Portfolio	
  (18)	
  
Land	
  Parcel,	
  Eighth	
  Ave,	
  
Manhattan,	
  NY	
  

Comfort	
  Inn,	
  North	
  Dartmouth,	
  MA	
  	
  

2012	
  Total	
  

January	
  1999	
  -‐	
  July	
  2007	
  	
  

2012	
  	
   $	
  

	
   155,000	
  	
  

	
  $	
  

February	
  2012	
  &	
  May	
  

June	
  2006	
  	
  

May	
  2006	
  	
  

April	
  2012	
  	
  

	
   19,250	
  	
  

March	
  2012	
  	
  

	
   -‐	
  

	
   7,195	
  	
  	
  
	
   7,195	
  	
  (1)	
  

	
   31,559	
  	
  (2)	
  

	
   120	
  	
  (3)	
  

	
   442	
  	
  	
  
	
   32,121	
  	
  	
  

	
   4,978	
  	
  (4)	
  

	
   5,037	
  	
  	
  
	
   1,216	
  	
  (5)	
  

	
  $	
  

	
   11,231	
  	
  	
  

(1) 

(2) 

The	
  operations	
  from	
  this	
  property	
  included	
  (loss)	
  income	
  of	
  ($137),	
  $858,	
  $546	
  for	
  the	
  years	
  ended	
  
December	
  31,	
  2014,	
  2013,	
  and	
  2012,	
  respectively.	
  

In	
  September	
  2013,	
  our	
  Board	
  of	
  Trustees	
  authorized	
  management	
  of	
  the	
  Company	
  to	
  sell	
  this	
  portfolio.	
  
On	
  September	
  20,	
  2013,	
  the	
  Company	
  entered	
  into	
  a	
  purchase	
  and	
  sale	
  agreement	
  to	
  dispose	
  of	
  a	
  
portfolio	
  of	
  16	
  non-‐core	
  hotel	
  properties,	
  for	
  an	
  aggregate	
  purchase	
  price	
  of	
  approximately	
  
$217,000.	
  	
  The	
  16	
  non-‐core	
  hotel	
  properties	
  in	
  the	
  portfolio	
  were	
  acquired	
  by	
  the	
  Company	
  between	
  
1999	
  and	
  2010.	
  We	
  recorded	
  an	
  impairment	
  loss	
  of	
  approximately	
  $6,591	
  for	
  those	
  assets	
  for	
  which	
  the	
  
anticipated	
  net	
  proceeds	
  do	
  not	
  exceed	
  the	
  carrying	
  value.	
   	
  

On	
  December	
  20,	
  2013,	
  the	
  Company	
  closed	
  on	
  the	
  sale	
  of	
  12	
  of	
  these	
  non-‐core	
  hotel	
  properties.	
  As	
  a	
  
result	
  of	
  entering	
  into	
  these	
  purchase	
  and	
  sale	
  agreements	
  for	
  the	
  16	
  non-‐core	
  assets	
  mentioned	
  above,	
  
the	
  operating	
  results	
  for	
  the	
  consolidated	
  assets	
  were	
  reclassified	
  to	
  discontinued	
  operations	
  in	
  the	
  
statement	
  of	
  operations	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  2013,	
  and	
  2012.	
  	
  The	
  12	
  assets	
  were	
  
sold	
  for	
  a	
  total	
  sales	
  price	
  of	
  $158,600,	
  reduced	
  the	
  Company’s	
  consolidated	
  mortgage	
  debt	
  by	
  $33,044	
  
and	
  generated	
  a	
  gain	
  on	
  sale	
  of	
  approximately	
  $31,559.	
  	
  	
  In	
  February	
  2014,	
  the	
  remaining	
  4	
  assets	
  were	
  
sold	
  for	
  a	
  total	
  sales	
  price	
  of	
  $58,400	
  and	
  reduced	
  the	
  Company’s	
  consolidated	
  mortgage	
  debt	
  by	
  
$45,710.	
  We	
  recorded	
  an	
  impairment	
  loss	
  of	
  approximately	
  $1,800	
  for	
  those	
  assets	
  for	
  which	
  the	
  
anticipated	
  net	
  proceeds	
  did	
  not	
  exceed	
  the	
  carrying	
  value.	
  

81 

	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
 
   
   
     
     
 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  	
  
	
   	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
	
   	
  
	
  	
  
	
  
	
  
	
  
	
   	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  	
  
	
   	
  
	
  	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  11	
  –	
  HOTEL	
  DISPOSITIONS	
  (CONTINUED)	
  

(3) 

(4) 

(5) 

We	
  recorded	
  an	
  impairment	
  loss	
  for	
  this	
  property	
  of	
  approximately	
  $3,723	
  as	
  the	
  net	
  proceeds	
  did	
  not	
  
exceed	
  the	
  carrying	
  value.	
  

On	
  February	
  23,	
  2012,	
  the	
  Company	
  closed	
  on	
  the	
  sale	
  of	
  14	
  non-‐core	
  hotel	
  properties,	
  including	
  three	
  
hotel	
  properties	
  owned	
  in	
  part	
  by	
  the	
  Company	
  through	
  an	
  unconsolidated	
  joint	
  venture,	
  and	
  closed	
  on	
  
the	
  remaining	
  four	
  properties,	
  on	
  May	
  8,	
  2012,	
  including	
  one	
  hotel	
  property	
  owned	
  in	
  part	
  by	
  the	
  
Company	
  through	
  an	
  unconsolidated	
  joint	
  venture.	
  	
  The	
  operating	
  results	
  for	
  the	
  consolidated	
  assets	
  
were	
  reclassified	
  to	
  discontinued	
  operations	
  in	
  the	
  statement	
  of	
  operations	
  for	
  the	
  year	
  ended	
  December	
  
31,	
  2012.	
  	
  The	
  18	
  assets	
  were	
  sold	
  for	
  a	
  total	
  sales	
  price	
  of	
  $155,000,	
  reduced	
  the	
  Company’s	
  
consolidated	
  mortgage	
  debt	
  by	
  $61,298	
  and	
  generated	
  a	
  gain	
  on	
  sale	
  of	
  approximately	
  $4,978.	
  	
  	
  	
  

On	
  March	
  30,	
  2012,	
  we	
  transferred	
  the	
  title	
  to	
  the	
  Comfort	
  Inn,	
  located	
  in	
  North	
  Dartmouth,	
  to	
  the	
  
lender.	
  	
  Previously,	
  we	
  had	
  ceased	
  operations	
  at	
  this	
  property	
  on	
  March	
  31,	
  2011.	
  	
  The	
  operating	
  results	
  
were	
  reclassified	
  to	
  discontinued	
  operations	
  in	
  the	
  statements	
  of	
  operations	
  for	
  the	
  year	
  ended	
  
December	
  31,	
  2012.	
  	
  The	
  transfer	
  of	
  the	
  title	
  resulted	
  in	
  a	
  gain	
  of	
  approximately	
  $1,216,	
  since	
  the	
  
outstanding	
  mortgage	
  loan	
  payable	
  exceeded	
  the	
  net	
  book	
  value	
  of	
  the	
  property.	
  

Assets	
  Held	
  for	
  Sale	
  

Assets	
  held	
  for	
  sale	
  or	
  liabilities	
  related	
  to	
  assets	
  held	
  for	
  sale	
  consisted	
  of	
  the	
  following	
  as	
  of	
  December	
  31,	
  2013:	
  

Land	
  
Buildings	
  and	
  Improvements	
  
Furniture,	
  Fixtures	
  and	
  Equipment	
  

Less:	
  Accumulated	
  Depreciation	
  &	
  Amortization	
  

Assets	
  Held	
  for	
  Sale	
  

Liabilities	
  Related	
  to	
  Assets	
  Held	
  for	
  Sale	
  

December	
  31,	
  2013	
  

$	
  

$	
  

$	
  

	
   9,517	
  
	
   58,129	
  
	
   9,198	
  
	
   76,844	
  

	
   (20,261)	
  

	
   56,583	
  

	
   45,835	
  

82 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts]	
  

NOTE	
  11	
  –	
  HOTEL	
  DISPOSITIONS	
  (CONTINUED)	
  

The	
  following	
  table	
  sets	
  forth	
  the	
  components	
  of	
  discontinued	
  operations	
  for	
  the	
  years	
  ended	
  December	
  31,	
  2014,	
  
2013,	
  and	
  2012.	
  Discontinued	
  operations	
  include	
  the	
  results	
  of	
  operations	
  for	
  hotels	
  sold	
  in	
  2013	
  and	
  the	
  first	
  
quarter	
  of	
  2014	
  (which	
  were	
  held	
  for	
  sale	
  as	
  of	
  December	
  31,	
  2013).	
  

Year	
  Ended	
  December	
  31,	
   	
  
2013	
  

2014	
  

2012	
  

Revenue:	
  

Hotel	
  Operating	
  Revenues	
  
Other	
  Revenue	
  
Total	
  Revenues	
  

Expenses:	
  

	
   $	
  

	
   1,940	
  	
  	
   $	
  
	
   -‐	
  	
  
	
   1,940	
  	
  	
  

	
   58,045	
  	
  	
   $	
  

	
   -‐	
  	
  
	
   58,045	
  	
  	
  

Hotel	
  Operating	
  Expenses	
  
Gain	
  on	
  Insurance	
  Settlements	
  
Hotel	
  Ground	
  Rent	
  
Real	
  Estate	
  and	
  Personal	
  Property	
  Taxes	
  and	
  Property	
  Insurance	
  
General	
  and	
  Administrative	
  
Acquisition	
  and	
  Termination	
  Transaction	
  Costs	
  
Depreciation	
  and	
  Amortization	
  
Interest	
  Expense	
  
Other	
  Expense	
  
Loss	
  on	
  Debt	
  Extinguishment	
  
Income	
  Tax	
  Expense	
  
Total	
  Expenses	
  

	
   1,151	
  	
  	
  
	
   74	
  	
  	
  
	
   -‐	
  	
  
	
   91	
  	
  	
  
	
   4	
  	
  	
  
	
   -‐	
  	
  
	
   1	
  	
  	
  
	
   354	
  	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   2	
  	
  	
  
	
   1,677	
  	
  	
  

	
   35,158	
  	
  	
  
	
   -‐	
  	
  
	
   -‐	
  	
  
	
   3,316	
  	
  	
  
	
   36	
  	
  	
  
	
   -‐	
  	
  
	
   7,050	
  	
  	
  
	
   4,863	
  	
  	
  
	
   44	
  	
  	
  
	
   -‐	
  	
  
	
   190	
  	
  	
  
	
   50,657	
  	
  	
  

	
   63,465	
  	
  
	
   11	
  	
  
	
   63,476	
  	
  

	
   39,046	
  	
  
	
   -‐	
  
	
   72	
  	
  
	
   3,636	
  	
  
	
   27	
  	
  
	
   8	
  	
  
	
   9,148	
  	
  
	
   7,872	
  	
  
	
   10	
  	
  
	
   168	
  	
  
	
   -‐	
  
	
   59,987	
  	
  

Income	
  from	
  Discontinued	
  Operations	
  

	
   $	
  

	
   263	
  	
  	
   $	
  

	
   7,388	
  	
  	
   $	
  

	
   3,489	
  	
  

We	
  allocate	
  to	
  income	
  or	
  loss	
  from	
  discontinued	
  operations	
  interest	
  expense	
  related	
  to	
  debt	
  that	
  is	
  to	
  be	
  assumed	
  
or	
  that	
  is	
  required	
  to	
  be	
  repaid	
  as	
  a	
  result	
  of	
  the	
  disposal	
  transaction.	
  

83 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  12	
  –	
  SHAREHOLDERS’	
  EQUITY	
  AND	
  NONCONTROLLING	
  INTERESTS	
  IN	
  PARTNERSHIP	
  

Common	
  Shares	
  

The	
  Company’s	
  outstanding	
  common	
  shares	
  have	
  been	
  duly	
  authorized,	
  and	
  are	
  fully	
  paid	
  and	
  non-‐assessable.	
  
Common	
  shareholders	
  are	
  entitled	
  to	
  receive	
  dividends	
  if	
  and	
  when	
  authorized	
  and	
  declared	
  by	
  the	
  Board	
  of	
  
Trustees	
  of	
  the	
  Company	
  out	
  of	
  assets	
  legally	
  available	
  and	
  to	
  share	
  ratably	
  in	
  the	
  assets	
  of	
  the	
  Company	
  legally	
  
available	
  for	
  distribution	
  to	
  its	
  shareholders	
  in	
  the	
  event	
  of	
  its	
  liquidation,	
  dissolution	
  or	
  winding	
  up	
  after	
  payment	
  
of,	
  or	
  adequate	
  provision	
  for,	
  all	
  known	
  debts	
  and	
  liabilities	
  of	
  the	
  Company.	
  

Preferred	
  Shares	
  

The	
  Declaration	
  of	
  Trust	
  authorizes	
  our	
  Board	
  of	
  Trustees	
  to	
  classify	
  any	
  unissued	
  preferred	
  shares	
  and	
  to	
  reclassify	
  
any	
  previously	
  classified	
  but	
  unissued	
  preferred	
  shares	
  of	
  any	
  series	
  from	
  time	
  to	
  time	
  in	
  one	
  or	
  more	
  series,	
  as	
  
authorized	
  by	
  the	
  Board	
  of	
  Trustees.	
  Prior	
  to	
  issuance	
  of	
  shares	
  of	
  each	
  series,	
  the	
  Board	
  of	
  Trustees	
  is	
  required	
  by	
  
Maryland	
  REIT	
  Law	
  and	
  our	
  Declaration	
  of	
  Trust	
  to	
  set	
  for	
  each	
  such	
  series,	
  subject	
  to	
  the	
  provisions	
  of	
  our	
  
Declaration	
  of	
  Trust	
  regarding	
  the	
  restriction	
  on	
  transfer	
  of	
  shares	
  of	
  beneficial	
  interest,	
  the	
  terms,	
  the	
  
preferences,	
  conversion	
  or	
  other	
  rights,	
  voting	
  powers,	
  restrictions,	
  limitations	
  as	
  to	
  dividends	
  or	
  other	
  
distributions,	
  qualifications	
  and	
  terms	
  or	
  conditions	
  of	
  redemption	
  for	
  each	
  such	
  series.	
  Thus,	
  our	
  Board	
  of	
  
Trustees	
  could	
  authorize	
  the	
  issuance	
  of	
  additional	
  preferred	
  shares	
  with	
  terms	
  and	
  conditions	
  which	
  could	
  have	
  
the	
  effect	
  of	
  delaying,	
  deferring	
  or	
  preventing	
  a	
  transaction	
  or	
  a	
  change	
  in	
  control	
  in	
  us	
  that	
  might	
  involve	
  a	
  
premium	
  price	
  for	
  holders	
  of	
  common	
  shares	
  or	
  otherwise	
  be	
  in	
  their	
  best	
  interest.	
  

Common	
  Units	
  

Common	
  Units	
  are	
  issued	
  in	
  connection	
  with	
  the	
  acquisition	
  of	
  wholly	
  owned	
  hotels	
  and	
  joint	
  venture	
  interests	
  in	
  
hotel	
  properties.	
  The	
  total	
  number	
  of	
  Common	
  Units	
  outstanding	
  as	
  of	
  December	
  31,	
  2014,	
  2013	
  and	
  2012	
  was	
  
6,849,412,	
  6,914,716,	
  and	
  7,112,506,	
  respectively.	
  These	
  units	
  can	
  be	
  redeemed	
  for	
  cash	
  or	
  converted	
  to	
  common	
  
shares,	
  at	
  the	
  Company’s	
  option,	
  on	
  a	
  one-‐for-‐one	
  basis.	
  The	
  number	
  of	
  common	
  shares	
  issuable	
  upon	
  exercise	
  of	
  
the	
  redemption	
  rights	
  will	
  be	
  adjusted	
  upon	
  the	
  occurrence	
  of	
  stock	
  splits,	
  mergers,	
  consolidation	
  or	
  similar	
  pro	
  
rata	
  share	
  transactions,	
  that	
  otherwise	
  would	
  have	
  the	
  effect	
  of	
  diluting	
  the	
  ownership	
  interest	
  of	
  the	
  limited	
  
partners	
  or	
  our	
  shareholders.	
  During	
  2014,	
  2013	
  and	
  2012,	
  18,900,	
  27,790,	
  and	
  157,810	
  Common	
  Units	
  were	
  
converted	
  to	
  common	
  shares,	
  respectively.	
  The	
  Company	
  redeemed	
  46,404	
  Common	
  Units	
  for	
  $338	
  during	
  2014.	
   	
  
In	
  addition,	
  as	
  noted	
  in	
  “Note	
  8	
  –	
  Share	
  Based	
  Payments,”	
  during	
  2014,	
  the	
  Company	
  issued	
  1,948,324	
  of	
  LTIP	
  
Units.	
  

84 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts]	
  

NOTE	
  13	
  –	
  INCOME	
  TAXES	
  

The	
  Company	
  elected	
  to	
  be	
  taxed	
  as	
  a	
  REIT	
  under	
  Sections	
  856	
  through	
  860	
  of	
  the	
  Internal	
  Revenue	
  Code	
  
commencing	
  with	
  its	
  taxable	
  year	
  ended	
  December	
  31,	
  1999.	
  To	
  qualify	
  as	
  a	
  REIT,	
  the	
  Company	
  must	
  meet	
  a	
  
number	
  of	
  organizational	
  and	
  operational	
  requirements,	
  including	
  a	
  requirement	
  that	
  it	
  currently	
  distribute	
  at	
  least	
  
90%	
  of	
  its	
  REIT	
  taxable	
  income	
  to	
  its	
  shareholders.	
  It	
  is	
  the	
  Company’s	
  current	
  intention	
  to	
  adhere	
  to	
  these	
  
requirements	
  and	
  maintain	
  the	
  Company’s	
  qualification	
  for	
  taxation	
  as	
  a	
  REIT.	
  As	
  a	
  REIT,	
  the	
  Company	
  generally	
  
will	
  not	
  be	
  subject	
  to	
  federal	
  corporate	
  income	
  tax	
  on	
  that	
  portion	
  of	
  its	
  net	
  income	
  that	
  is	
  currently	
  distributed	
  to	
  
shareholders.	
  If	
  the	
  Company	
  fails	
  to	
  qualify	
  for	
  taxation	
  as	
  a	
  REIT	
  in	
  any	
  taxable	
  year,	
  it	
  will	
  be	
  subject	
  to	
  federal	
  
income	
  taxes	
  at	
  regular	
  corporate	
  rates	
  (including	
  any	
  applicable	
  alternative	
  minimum	
  tax)	
  and	
  may	
  not	
  be	
  able	
  to	
  
qualify	
  as	
  a	
  REIT	
  for	
  four	
  subsequent	
  taxable	
  years.	
  Even	
  if	
  the	
  Company	
  qualifies	
  for	
  taxation	
  as	
  a	
  REIT,	
  the	
  
Company	
  may	
  be	
  subject	
  to	
  certain	
  state	
  and	
  local	
  taxes	
  on	
  its	
  income	
  and	
  property,	
  and	
  to	
  federal	
  income	
  and	
  
excise	
  taxes	
  on	
  its	
  undistributed	
  taxable	
  income.	
  

Taxable	
  income	
  from	
  non-‐REIT	
  activities	
  managed	
  through	
  taxable	
  REIT	
  subsidiaries	
  is	
  subject	
  to	
  federal,	
  state	
  and	
  
local	
  income	
  taxes.	
  44	
  New	
  England	
  is	
  subject	
  to	
  income	
  taxes	
  at	
  the	
  applicable	
  federal,	
  state	
  and	
  local	
  tax	
  rates.	
   	
  

The	
  provision	
  for	
  income	
  taxes	
  differs	
  from	
  the	
  amount	
  of	
  income	
  tax	
  determined	
  by	
  applying	
  the	
  applicable	
  U.S.	
  
statutory	
  federal	
  income	
  tax	
  rate	
  to	
  pretax	
  income	
  from	
  continuing	
  operations	
  as	
  a	
  result	
  of	
  the	
  following	
  
differences:	
  

Statutory	
  federal	
  income	
  tax	
  provision	
   	
  
Adjustment	
  for	
  nontaxable	
  loss	
   	
  
State	
  income	
  taxes,	
  net	
  of	
  federal	
  income	
  tax	
  effect	
  
Recognition	
  of	
  deferred	
  tax	
  assets	
  
Changes	
  in	
  valuation	
  allowance	
  

	
   $	
  

	
   (25,274)	
  	
  
	
   (367)	
  	
  
	
   91	
  	
  
	
   -‐	
  	
  

	
   5,152	
  	
   $	
  

	
   (7,472)	
  	
  
	
   (1,317)	
  	
  
	
   (1,963)	
  	
  
	
   -‐	
  	
  

	
   1,409	
  
	
   (623)	
  
	
   151	
  
	
   -‐	
  
	
   (4,292)	
  

For	
  the	
  year	
  ended	
  December	
  31,	
  
2013	
  

2012	
  

2014	
  
	
   22,865	
  	
   $	
  

Total	
  income	
  tax	
  benefit	
  

	
   $	
  

	
   (2,685)	
  	
   $	
  

	
   (5,600)	
  	
   $	
  

	
   (3,355)	
  

The	
  components	
  of	
  the	
  Company’s	
  income	
  tax	
  expense	
  (benefit)	
  from	
  continuing	
  operations	
  for	
  the	
  years	
  ended	
  
December	
  31,	
  2014,	
  2013	
  and	
  2012	
  were	
  as	
  follows:	
  

For	
  the	
  year	
  ended	
  December	
  31,	
  
2013	
  

2014	
  

2012	
  

Income	
  tax	
  expense	
  (benefit):	
  
Current:	
  
	
   	
   	
   	
   	
   	
   	
   Federal	
  
	
   	
   	
   	
   	
   	
   	
   State	
  
Deferred:	
  
	
   	
   	
   	
   	
   	
   	
   Federal	
  
	
   	
   	
   	
   	
   	
   	
   State	
  
Total	
  

Income	
  tax	
  expense	
  (benefit):	
  
	
   	
   	
   	
   	
   	
   	
   From	
  continuing	
  operations	
  
	
   	
   	
   	
   	
   	
   	
   From	
  discontinued	
  operations	
  
Total	
  

	
   $	
  

	
   $	
  

	
   -‐	
  	
   $	
  
	
   -‐	
  	
  

	
   -‐	
  	
   $	
  
	
   -‐	
  	
  

	
   -‐	
  
	
   229	
  

	
   (2,130)	
  	
  
	
   (555)	
  	
  
	
   (2,685)	
  	
   $	
  

	
   (3,604)	
  	
  
	
   (1,996)	
  	
  
	
   (5,600)	
  	
   $	
  

	
   (3,584)	
  
	
   -‐	
  
	
   (3,355)	
  

	
   $	
  

	
   (2,685)	
  	
  
	
   2	
  	
  
	
   (2,683)	
  	
   $	
  

	
   (5,600)	
  	
  
	
   190	
  	
  
	
   (5,410)	
  	
   $	
  

	
   (3,355)	
  
	
   -‐	
  
	
   (3,355)	
  

85 

	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  13	
  –	
  INCOME	
  TAXES	
  (CONTINUED)	
  

The	
  components	
  of	
  consolidated	
  TRS’s	
  net	
  deferred	
  tax	
  asset	
  as	
  of	
  December	
  31,	
  2014	
  and	
  2013	
  were	
  as	
  follows:	
  

Deferred	
  tax	
  assets:	
  

Net	
  operating	
  loss	
  carryforwards	
  
Accrued	
  expenses	
  and	
  other	
  
Tax	
  credit	
  carryforwards	
  

Total	
  gross	
  deferred	
  tax	
  assets	
  

Valuation	
  allowance	
  

Total	
  net	
  deferred	
  tax	
  assets	
  
Deferred	
  tax	
  liabilities:	
  

Depreciation	
  and	
  amortization	
  

Total	
  Net	
  deferred	
  tax	
  assets	
  (liabilities)	
  

As	
  of	
  December	
  31,	
  

2014	
  

2013	
  

$	
  

$	
  

$	
  

	
   11,387	
  	
  
	
   616	
  	
  
	
   481	
  	
  
	
   12,484	
  	
  
	
   (804)	
  	
  
	
   11,680	
  	
  

	
   232	
  	
  
	
   11,448	
  	
  

$	
  

$	
  

$	
  

	
   8,605	
  
	
   685	
  
	
   280	
  
	
   9,570	
  
	
   (804)	
  
	
   8,766	
  

	
   -‐	
  
	
   8,766	
  

In	
  assessing	
  the	
  realizability	
  of	
  deferred	
  tax	
  assets,	
  management	
  considers	
  whether	
  it	
  is	
  more	
  likely	
  than	
  not	
  that	
  
some	
  portion	
  or	
  all	
  of	
  the	
  deferred	
  tax	
  assets	
  will	
  not	
  be	
  realized.	
  Based	
  on	
  limitations	
  related	
  to	
  the	
  utilization	
  of	
  
certain	
  tax	
  attribute	
  carryforwards,	
  the	
  Company	
  recorded	
  a	
  valuation	
  allowance	
  of	
  approximately	
  $804	
  as	
  these	
  
attributes	
  are	
  not	
  more	
  likely	
  than	
  not	
  to	
  be	
  realized	
  prior	
  to	
  their	
  expiration.	
  Based	
  on	
  the	
  level	
  of	
  historical	
  
taxable	
  income,	
  tax	
  planning	
  strategies	
  and	
  projections	
  for	
  future	
  taxable	
  income	
  over	
  the	
  periods	
  in	
  which	
  the	
  
remaining	
  deferred	
  tax	
  assets	
  are	
  deductible,	
  Management	
  believes	
  it	
  is	
  more	
  likely	
  than	
  not	
  that	
  the	
  remaining	
  
deferred	
  tax	
  assets	
  will	
  be	
  realized.	
  

As	
  of	
  December	
  31,	
  2014,	
  we	
  have	
  gross	
  federal	
  net	
  operating	
  loss	
  carryforwards	
  of	
  $28,732	
  which	
  expire	
  over	
  
various	
  periods	
  from	
  2023	
  through	
  2034.	
   	
   As	
  of	
  December	
  31,	
  2014,	
  we	
  have	
  gross	
  state	
  net	
  operating	
  loss	
  
carryforwards	
  of	
  $30,868	
  which	
  expire	
  over	
  various	
  periods	
  from	
  2014	
  to	
  2034.	
   	
   The	
  Company	
  has	
  tax	
  credits	
  of	
  
$481	
  available	
  which	
  begin	
  to	
  expire	
  in	
  2028.	
   	
   	
  

Earnings	
  and	
  profits,	
  which	
  will	
  determine	
  the	
  taxability	
  of	
  distributions	
  to	
  shareholders,	
  will	
  differ	
  from	
  net	
  
income	
  reported	
  for	
  financial	
  reporting	
  purposes	
  due	
  to	
  the	
  differences	
  for	
  federal	
  tax	
  purposes	
  in	
  the	
  estimated	
  
useful	
  lives	
  and	
  methods	
  used	
  to	
  compute	
  depreciation.	
  The	
  following	
  table	
  sets	
  forth	
  certain	
  per	
  share	
  
information	
  regarding	
  the	
  Company’s	
  common	
  and	
  preferred	
  share	
  distributions	
  for	
  the	
  years	
  ended	
  December	
  31,	
  
2014,	
  2013	
  and	
  2012.	
  

2014	
  

2013	
  

2012	
  

Preferred	
  Shares	
  -‐	
  8%	
  Series	
  A	
  

Ordinary	
  income	
   	
  
Return	
  of	
  Capital	
   	
  
Capital	
  Gain	
  Distribution	
   	
  
Preferred	
  Shares	
  -‐	
  8%	
  Series	
  B	
  

Ordinary	
  income	
   	
  
Return	
  of	
  Capital	
   	
  
Capital	
  Gain	
  Distribution	
   	
  

Preferred	
  Shares	
  -‐	
  6.875%	
  Series	
  C	
  

Ordinary	
  income	
   	
  
Return	
  of	
  Capital	
   	
  
Capital	
  Gain	
  Distribution	
   	
  

Common	
  Shares	
  -‐	
  Class	
  A	
  

Ordinary	
  income	
   	
  
Return	
  of	
  Capital	
   	
  
Capital	
  Gain	
  Distribution	
   	
  

86 

N/A	
  	
  
N/A	
  	
  
N/A	
  	
  

100.00%	
  	
  
0.00%	
  	
  
0.00%	
  	
  

100.00%	
  	
  
0.00%	
  	
  
0.00%	
  	
  

76.34%	
  	
  
23.66%	
  	
  
0.00%	
  	
  

100.00%	
  	
  
0.00%	
  	
  
0.00%	
  	
  

100.00%	
  	
  
0.00%	
  	
  
0.00%	
  	
  

100.00%	
  	
  
0.00%	
  	
  
0.00%	
  	
  

45.15%	
  	
  
54.85%	
  	
  
0.00%	
  	
  

100.00%	
  
0.00%	
  
0.00%	
  

100.00%	
  
0.00%	
  
0.00%	
  

N/A	
  
N/A	
  
N/A	
  

1.28%	
  
98.72%	
  
0.00%	
  

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
notes to the consolidated financial statements 
for the years ended december 31, 2014, 2013, and 2012 
[in thousands, except share/unit and per share amounts] 

NOTE	
  14	
  –	
  SELECTED	
  QUARTERLY	
  FINANCIAL	
  DATA	
  (UNAUDITED)	
  

Year	
  Ended	
  December	
  31,	
  2014	
  

First	
  Quarter	
  

	
   Second	
  Quarter	
   	
   Third	
  Quarter	
  

Total	
  Revenues	
  
Total	
  Expenses	
  

	
   $	
  

	
   80,348	
  	
  	
   $	
  
	
   85,203	
  	
  	
  

	
   111,830	
  	
  	
   $	
  
	
   53,593	
  	
  	
  

	
   Fourth	
  Quarter	
  
	
   112,985	
  	
  
	
   106,232	
  	
  

	
   113,048	
  	
  	
   $	
  
	
   106,625	
  	
  	
  

(Loss)	
  Income	
  from	
  Unconsolidated	
  Joint	
  Ventures	
  

(Loss)	
  Income	
  from	
  Continuing	
  Operations	
  

	
   (420)	
  	
  

	
   (5,275)	
  	
  

	
   419	
  	
  	
  

	
   58,656	
  	
  	
  

	
   607	
  	
  	
  

	
   7,030	
  	
  	
  

	
   87	
  	
  

	
   6,840	
  	
  

Income	
  Tax	
  Benefit	
  
Income	
  (Loss)	
  from	
  Discontinued	
  Operations	
  (including	
  Gain	
  on	
  Disposition	
  
of	
  Discontinued	
  Assets)*	
  

Net	
  (Loss)	
  Income	
  

(Loss)	
  Income	
  Allocated	
  to	
  Noncontrolling	
  Interests	
  in	
  Continuing	
  Operations	
  	
  
Issuance	
  Costs	
  of	
  Redeemed	
  Preferred	
  Stock	
  

Preferred	
  Distributions	
  

Net	
  (Loss)	
  Income	
  applicable	
  to	
  Common	
  Shareholders	
  

Basic	
  and	
  diluted	
  earnings	
  per	
  share:	
  
(Loss)	
  Income	
  from	
  continuing	
  operations	
  applicable	
  to	
  common	
  
shareholders	
  

Discontinued	
  Operations	
  

Net	
  (Loss)	
  Income	
  applicable	
  to	
  Common	
  Shareholders	
  

Weighted	
  Average	
  Common	
  Shares	
  Outstanding	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   108	
  	
  	
  

	
   (1)	
  	
  

	
   699	
  	
  	
  

	
   1,879	
  	
  

	
   (1,346)	
  	
  

	
   (6,513)	
  	
  

	
   (507)	
  	
  
	
   -‐	
  	
  

	
   3,589	
  	
  	
  

	
   (69)	
  	
  

	
   58,586	
  	
  	
  

	
   1,655	
  	
  	
  
	
   -‐	
  	
  

	
   3,589	
  	
  	
  

	
   (142)	
  	
  

	
   7,587	
  	
  	
  

	
   (49)	
  	
  
	
   -‐	
  	
  

	
   3,589	
  	
  	
  

	
   (9,595)	
  	
   $	
  

	
   53,342	
  	
  	
   $	
  

	
   4,047	
  	
  	
   $	
  

	
   (0.04)	
  	
   $	
  

	
   0.27	
  	
  	
   $	
  

	
   0.02	
  	
  	
   $	
  

	
   (0.01)	
  	
  

0.00	
  	
  	
  

0.00	
  	
  	
  

	
   (0.05)	
  	
   $	
  

	
   0.27	
  	
  	
   $	
  

	
   0.02	
  	
  	
   $	
  

	
   (108)	
  

	
   8,611	
  	
  

	
   (83)	
  
	
   -‐	
  

	
   3,589	
  	
  

	
   5,105	
  	
  

	
   0.03	
  	
  

0.00	
  	
  

	
   0.03	
  	
  

Basic	
  

Diluted	
  

Total	
  Revenues	
  

Total	
  Expenses	
  

(Loss)	
  Income	
  from	
  Unconsolidated	
  Joint	
  Ventures	
  

(Loss)	
  Income	
  from	
  Continuing	
  Operations	
  

	
   	
   200,743,751	
  	
  	
  

	
   	
   198,494,473	
  	
  	
  

	
   	
   198,597,517	
  	
  	
  

	
   	
   198,629,945	
  	
  

	
   	
   200,743,751	
  	
  	
  

	
   	
   200,213,554	
  	
  	
  

	
   	
   200,621,986	
  	
  	
  

	
   	
   200,779,472	
  	
  

Year	
  Ended	
  December	
  31,	
  2013	
  

First	
  Quarter	
  

	
   Second	
  Quarter	
   	
   Third	
  Quarter	
  

	
   Fourth	
  Quarter	
  

	
   $	
  

	
   65,878	
  	
  	
   $	
  

	
   91,068	
  	
  	
   $	
  

	
   90,741	
  	
  	
   $	
  

	
   92,510	
  	
  

	
   73,174	
  	
  	
  

	
   (396)	
  	
  

	
   (7,692)	
  	
  

	
   71,703	
  	
  	
  

	
   148	
  	
  	
  

	
   19,513	
  	
  	
  

	
   87,512	
  	
  	
  

	
   227	
  	
  	
  

	
   3,456	
  	
  	
  

	
   90,820	
  	
  

	
   (1,814)	
  

	
   (124)	
  

Income	
  Tax	
  Benefit	
  
(Loss)	
  Income	
  from	
  Discontinued	
  Operations	
  (including	
  Gain	
  on	
  
Disposition	
  of	
  Discontinued	
  Assets)	
  

Net	
  (Loss)	
  Income	
  

	
   1,129	
  	
  	
  

	
   (1,222)	
  	
  

	
   2,375	
  	
  	
  

	
   3,318	
  	
  

	
   (1,113)	
  	
  

	
   (7,676)	
  	
  

	
   (206)	
  	
  

	
   18,085	
  	
  	
  

	
   (3,532)	
  	
  

	
   2,299	
  	
  	
  

	
   34,046	
  	
  

	
   37,240	
  	
  

(Loss)	
  Income	
  Allocated	
  to	
  Noncontrolling	
  Interests	
  in	
  Continuing	
  
Operations	
  
Extinguishment	
  of	
  Issuance	
  Costs	
  Upon	
  Redemption	
  of	
  Series	
  A	
  
Preferred	
  Shares	
  

Preferred	
  Distributions	
  

Net	
  (Loss)	
  Income	
  applicable	
  to	
  Common	
  Shareholders	
  

Basic	
  and	
  diluted	
  earnings	
  per	
  share:	
  
(Loss)	
  Income	
  from	
  continuing	
  operations	
  applicable	
  to	
  common	
  
shareholders	
  
Discontinued	
  Operations	
  

Net	
  Loss	
  (Income)	
  applicable	
  to	
  Common	
  Shareholders	
  
Weighted	
  Average	
  Common	
  Shares	
  Outstanding	
  
Basic	
  

Diluted	
  

*	
  

	
   (673)	
  	
  

	
   210	
  	
  	
  

	
   (164)	
  	
  

	
   962	
  	
  

	
   2,250	
  	
  	
  

	
   3,844	
  	
  	
  

	
   -‐	
  	
  

	
   -‐	
  	
  

	
   -‐	
  

	
   3,589	
  	
  	
  

	
   3,589	
  	
  	
  

	
   3,589	
  	
  

	
   (13,097)	
  	
   $	
  

	
   14,286	
  	
  	
   $	
  

	
   (1,126)	
  	
   $	
  

	
   32,689	
  	
  

	
   (0.07)	
  	
   $	
  
0.00	
  	
  	
  

	
   (0.07)	
  	
   $	
  

	
   0.08	
  	
  	
   $	
  
	
   (0.01)	
  	
  

	
   0.01	
  	
  	
   $	
  
	
   (0.02)	
  	
  

	
   0.07	
  	
  	
   $	
  

	
   (0.01)	
  	
   $	
  

0.00	
  	
  
	
   0.16	
  	
  

	
   0.16	
  	
  

	
   $	
  

	
   $	
  

	
   $	
  

	
   	
   197,029,017	
  	
  	
  

	
   	
   198,633,051	
  	
  	
  

	
   	
   198,878,496	
  	
  	
  

	
   	
   198,944,277	
  	
  

	
   	
   197,029,017	
  	
  	
  

	
   	
   201,201,337	
  	
  	
  

	
   	
   201,644,633	
  	
  	
  

	
   	
   198,944,277	
  	
  

Effective	
  January	
  1,	
  2014,	
  we	
  early	
  adopted	
  ASU	
  Update	
  No.	
  2014-‐08	
  concerning	
  the	
  classification	
  and	
  reporting	
  of	
  
discontinued	
  operations.	
  As	
  such,	
  this	
  line	
  item	
  for	
  quarterly	
  results	
  presented	
  for	
  2014	
  will	
  not	
  be	
  comparable.

87 

 
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
schedule iii – real estate and accumulated depreciation as of december 31, 2014 
[in thousands]   

Initial	
  Costs	
  

Costs	
  Capitalized	
  
Subsequent	
  to	
  
Acquisition	
  

Gross	
  Amounts	
  at	
  
which	
  Carrried	
  at	
  
Close	
  of	
  Period	
  

Accumulated	
  
Depreciation	
  

Net	
  Book	
  
Value	
  

Description	
   	
  Encumbrances	
  Land	
  

Buildings	
  &	
   	
   	
   	
   	
  
Improvements	
   	
   Land	
  

Buildings	
  &	
   	
   	
  

Buildings	
  &	
   	
   	
  

Improvements	
  Land	
  

Improvements	
   Total	
   	
  

Buildings	
  &	
  
Improvements*	
  

Land,	
  
Buildings	
  &	
  
Improvements	
  

Date	
  of	
  
Acquisition	
  

Residence	
  
Inn,	
  
Framingham,	
  
MA	
  
Hampton	
  
Inn,	
  
New	
  York,	
  NY	
  	
  
Residence	
  
Inn,	
  
Greenbelt,	
  
MD	
  
Courtyard,	
  
Brookline,	
  
MA	
  
Residence	
  
Inn,	
  
Tyson's	
  
Corner,	
  VA	
  
Hilton	
  
Garden	
  Inn,	
   	
  
JFK	
  Airport,	
  
NY	
  
Hawthorne	
  
Suites,	
  
Franklin,	
  MA	
   	
  
Holiday	
  Inn	
  
Exp,	
  
Cambridge,	
  
MA	
  
Residence	
  
Inn,	
  
Norwood,	
  
MA	
  
Hampton	
  
Inn,	
  
Chelsea,	
  NY	
  
Hyatt	
  House,	
  
Gaithersburg,	
  
MD	
  
Hyatt	
  House,	
  
Pleasant	
  
Hills,	
  CA	
  
Hyatt	
  House,	
  
Pleasanton,	
  
CA	
  
Hyatt	
  House,	
  
Scottsdale,	
  
AZ	
  
Hyatt	
  House,	
  
White	
  Plains,	
  
NY	
  
Holiday	
  Inn	
  
Exp	
  &	
  Suites,	
  
Chester,	
  NY	
  

1,325	
  	
  

	
   12,737	
  	
  

	
   -‐	
  

	
   4,844	
  	
  

1,325	
  	
  

	
   17,581	
  	
  

18,906	
  	
  	
  

($4,860)	
  

	
   14,046	
  	
  

03/26/04	
  

(23,026)	
  

5,472	
  	
  

	
   23,280	
  	
  

	
   -‐	
  

	
   1,458	
  	
  

5,472	
  	
  

	
   24,738	
  	
  

30,210	
  	
  	
  

(6,703)	
  

	
   23,507	
  	
  

04/01/05	
  

2,615	
  	
  

	
   14,815	
  	
  

	
   -‐	
  

	
   2,250	
  	
  

2,615	
  	
  

	
   17,065	
  	
  

19,680	
  	
  	
  

(5,021)	
  

	
   14,659	
  	
  

07/16/04	
  

(36,453)	
  

	
   -‐	
  

	
   47,414	
  	
  

	
   -‐	
  

	
   1,554	
  	
  

	
   -‐	
  

	
   48,968	
  	
  

48,968	
  	
  	
  

(12,438)	
  

	
   36,530	
  	
  

06/16/05	
  

4,283	
  	
  

	
   14,475	
  	
  

	
   -‐	
  

	
   1,920	
  	
  

4,283	
  	
  

	
   16,395	
  	
  

20,678	
  	
  	
  

(4,113)	
  

	
   16,565	
  	
  

02/02/06	
  

(19,707)	
  

	
   -‐	
  

	
   25,018	
  	
  

	
   -‐	
  

	
   2,618	
  	
  

	
   -‐	
  

	
   27,636	
  	
  

27,636	
  	
  	
  

(6,770)	
  

	
   20,866	
  	
  

02/16/06	
  

(7,520)	
  

1,872	
  	
  

	
   8,968	
  	
  

	
   -‐	
  

	
   505	
  	
  

1,872	
  	
  

	
   9,473	
  	
  

11,345	
  	
  	
  

(2,211)	
  

	
   9,134	
  	
  

04/25/06	
  

1,956	
  	
  

	
   9,793	
  	
  

	
   -‐	
  

	
   2,352	
  	
  

1,956	
  	
  

	
   12,145	
  	
  

14,101	
  	
  	
  

(3,469)	
  

	
   10,632	
  	
  

05/03/06	
  

1,970	
  	
  

	
   11,761	
  	
  

	
   -‐	
  

	
   1,482	
  	
  

1,970	
  	
  

	
   13,243	
  	
  

15,213	
  	
  	
  

(2,904)	
  

	
   12,309	
  	
  

07/27/06	
  

(33,696)	
  

8,905	
  	
  

	
   33,500	
  	
  

	
   -‐	
  

	
   1,944	
  	
  

8,905	
  	
  

	
   35,444	
  	
  

44,349	
  	
  	
  

(8,215)	
  

	
   36,134	
  	
  

09/29/06	
  

(13,720)	
  

2,912	
  	
  

	
   16,001	
  	
  

	
   -‐	
  

	
   3,812	
  	
  

2,912	
  	
  

	
   19,813	
  	
  

22,725	
  	
  	
  

(4,616)	
  

	
   18,109	
  	
  

12/28/06	
  

(20,160)	
  

6,216	
  	
  

	
   17,229	
  	
  

	
   -‐	
  

	
   2,996	
  	
  

6,216	
  	
  

	
   20,225	
  	
  

26,441	
  	
  	
  

(4,200)	
  

	
   22,241	
  	
  

12/28/06	
  

(14,490)	
  

3,941	
  	
  

	
   12,560	
  	
  

	
   -‐	
  

	
   3,497	
  	
  

3,941	
  	
  

	
   16,057	
  	
  

19,998	
  	
  	
  

(3,815)	
  

	
   16,183	
  	
  

12/28/06	
  

(16,778)	
  

3,060	
  	
  

	
   19,968	
  	
  

	
   -‐	
  

	
   3,408	
  	
  

3,060	
  	
  

	
   23,376	
  	
  

26,436	
  	
  	
  

(5,575)	
  

	
   20,861	
  	
  

12/28/06	
  

(33,030)	
  

8,823	
  	
  

	
   30,273	
  	
  

	
   -‐	
  

	
   2,700	
  	
  

8,823	
  	
  

	
   32,973	
  	
  

41,796	
  	
  	
  

(7,501)	
  

	
   34,295	
  	
  

12/28/06	
  

(6,264)	
  

1,500	
  	
  

	
   6,671	
  	
  

	
   -‐	
  

	
   242	
  	
  

1,500	
  	
  

	
   6,913	
  	
  

	
   8,413	
  	
  	
  

(1,404)	
  

	
   7,009	
  	
  

01/25/07	
  

(1)	
   	
   	
   	
   	
   	
   	
   	
   Costs	
  capitalized	
  subsequent	
  to	
  acquisition	
  include	
  reductions	
  of	
  asset	
  value	
  due	
  to	
  impairment.	
  

88 

	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
schedule iii – real estate and accumulated depreciation as of december 31, 2014 
[in thousands]	
  

Initial	
  Costs	
  

Costs	
  Capitalized	
  
Subsequent	
  to	
  
Acquisition	
  

Gross	
  Amounts	
  at	
  
which	
  Carrried	
  at	
  
Close	
  of	
  Period	
  

Accumulated	
  
Depreciation	
  

Net	
  Book	
  
Value	
  

Description	
  

	
  Encumbrances	
   Land	
  

Improvements	
   	
   Land	
  

Improvements	
   Land	
  

Improvements	
   Total	
  

Buildings	
  &	
   	
   	
   	
   	
  

Buildings	
  &	
   	
   	
  

Buildings	
  &	
   	
   	
  

Buildings	
  &	
  
Improvements*	
  

Land,	
  
Buildings	
  &	
  
Improvements	
  

Date	
  of	
  
Acquisition	
  

Hampton	
  Inn,	
  
Seaport,	
  NY	
  
Sheraton	
  
Hotel,	
  
JFK	
  Airport,	
  
NY	
  
Hampton	
  Inn,	
  
Philadelphia,	
  
PA	
  

Duane	
  Street,	
  
Tribeca,	
  NY	
  

NU	
  Hotel,	
  
Brooklyn,	
  NY	
   	
  	
  

Hilton	
  
Garden	
  Inn,	
  
Tribeca,	
  NY	
  

Hampton	
  Inn,	
   	
  
Times	
  
Square,	
  NY	
  

Holiday	
  Inn	
  
Express,	
  
Times	
  
Square,	
  NY	
  

Candlewood	
  
Suites,	
  
Times	
  
Square,	
  NY	
  

Hyatt	
  Place,	
  
KOP,	
  PA	
  
Holiday	
  Inn	
  
Express,	
   	
  
Wall	
  Street,	
  
NY	
  

Hampton	
  Inn,	
   	
  
Washington,	
  
DC	
  

Courtyard,	
  
Alexandria,	
  
VA	
  

Sheraton,	
  
Wilmington	
  
South,	
  DE	
  

Holiday	
  Inn,	
  
Water	
  Street,	
  
NY	
  

(17,764)	
  	
   7,816	
  	
  

	
   19,040	
  	
  

	
   -‐	
  

	
   811	
  	
  

	
   7,816	
  	
  

	
   19,851	
  	
  

27,667	
  	
   	
  

(4,049)	
  

	
   23,618	
  	
  

02/01/07	
  

	
   -‐	
  

	
   27,315	
  	
  

	
   -‐	
  

	
   1,430	
  	
  

	
   -‐	
  

	
   28,745	
  	
  

28,745	
  	
   	
  

(4,877)	
  

	
   23,868	
  	
  

06/13/08	
  

	
   3,490	
  	
  

	
   24,382	
  	
  

	
   -‐	
  

	
   5,914	
  	
  

	
   3,490	
  	
  

	
   30,296	
  	
  

33,786	
  	
   	
  

(10,619)	
  

	
   23,167	
  	
  

02/15/06	
  

(9,352)	
  	
   8,213	
  	
  

	
   12,869	
  	
  

	
   -‐	
  

	
   1,276	
  	
  

	
   8,213	
  	
  

	
   14,145	
  	
  

22,358	
  	
   	
  

(2,883)	
  

	
   19,475	
  	
  

01/04/08	
  

	
   -‐	
  

	
   22,042	
  	
  

	
   -‐	
  

	
   1,515	
  	
  

	
   -‐	
  

	
   23,557	
  	
  

23,557	
  	
   	
  

(3,947)	
  

	
   19,610	
  	
  

01/14/08	
  

	
   (46,500)	
  

21,077	
  	
  

	
   42,955	
  	
   	
  

	
   -‐	
  

	
   583	
  	
  

21,077	
  	
  

	
   43,538	
  	
  

64,615	
  	
   	
  

	
   (6,222)	
  

	
   58,393	
  	
  

05/01/09	
  

10,691	
  	
  

	
   41,637	
  	
   	
  

	
   -‐	
  

	
   316	
  	
  

10,691	
  	
  

	
   41,953	
  	
  

52,644	
  	
   	
  

	
   (5,163)	
  

	
   47,481	
  	
  

02/09/10	
  

11,075	
  	
  

	
   43,113	
  	
   	
  

	
   -‐	
  

	
   54	
  	
  

11,075	
  	
  

	
   43,167	
  	
  

54,242	
  	
   	
  

	
   (5,288)	
  

	
   48,954	
  	
  

02/09/10	
  

10,281	
  	
  

	
   36,687	
  	
   	
  

	
   -‐	
  

	
   44	
  	
  

10,281	
  	
  

	
   36,731	
  	
  

47,012	
  	
   	
  

	
   (4,491)	
  

	
   42,521	
  	
  

02/09/10	
  

	
  	
   1,133	
  	
  

	
   7,267	
  	
   	
  

	
   -‐	
  

	
   4,012	
  	
  

	
   1,133	
  	
  

	
   11,279	
  	
  

12,412	
  	
   	
  

	
   (4,436)	
  

	
   7,976	
  	
  

08/17/10	
  

12,152	
  	
  

	
   21,100	
  	
   	
  

	
   -‐	
  

	
   323	
  	
  

12,152	
  	
  

	
   21,423	
  	
  

33,575	
  	
   	
  

	
   (2,526)	
  

	
   31,049	
  	
  

05/09/10	
  

	
  	
   9,335	
  	
  

	
   58,048	
  	
   	
  

	
   -‐	
  

	
   1,191	
  	
  

	
   9,335	
  	
  

	
   59,239	
  	
  

68,574	
  	
   	
  

	
   (6,651)	
  

	
   61,923	
  	
  

09/01/10	
  

	
   (23,403)	
  	
   6,376	
  	
  

	
   26,089	
  	
   	
  

	
   -‐	
  

	
   2,555	
  	
  

	
   6,376	
  	
  

	
   28,644	
  	
  

35,020	
  	
   	
  

	
   (6,701)	
  

	
   28,319	
  	
  

09/29/06	
  

	
  	
   1,765	
  	
  

	
   16,929	
  	
   	
  

	
   -‐	
  

	
   1,187	
  	
  

	
   1,765	
  	
  

	
   18,116	
  	
  

19,881	
  	
   	
  

	
   (2,902)	
  

	
   16,979	
  	
  

12/21/10	
  

	
  	
   7,341	
  	
  

	
   28,591	
  	
   	
  

	
   -‐	
  

	
   326	
  	
  

	
   7,341	
  	
  

	
   28,917	
  	
  

36,258	
  	
   	
  

	
   (2,415)	
  

	
   33,843	
  	
  

03/25/11	
  

(1)	
   	
   	
   	
   	
   	
   	
   	
   Costs	
  capitalized	
  subsequent	
  to	
  acquisition	
  include	
  reductions	
  of	
  asset	
  value	
  due	
  to	
  impairment.	
  

89 

	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
hersha hospitality trust and subsidiaries 
schedule iii – real estate and accumulated depreciation as of december 31, 2014 
[in thousands]   

Initial	
  Costs	
  

Costs	
  Capitalized	
  
Subsequent	
  to	
  
Acquisition	
  

Gross	
  Amounts	
  at	
  
which	
  Carrried	
  at	
  
Close	
  of	
  Period	
  

Accumulated	
  
Depreciation	
  

Net	
  Book	
  
Value	
  

Description	
   	
  Encumbrances	
   Land	
  

Improvements	
  

	
   Land	
  

Improvements	
   Land	
  

Improvements	
   Total	
  

Buildings	
  &	
   	
   	
   	
   	
  

Buildings	
  &	
   	
   	
  

Buildings	
  &	
   	
   	
  

Buildings	
  &	
  
Improvements*	
  

Land,	
  
Buildings	
  &	
  
Improvements	
  

Date	
  of	
  
Acquisition	
  

Capitol	
  Hill	
  
Suites	
  
Washington,	
  
DC	
  

Courtyard,	
  
LA	
  
Westside,	
  
CA	
  

Hampton	
  
Inn,	
  
Pearl	
  Street,	
  
NY	
  

Courtyard,	
  
Miami,	
  FL	
  

The	
  
Rittenhouse	
  
Hotel,	
  PA	
  

Bulfinch,	
  
Boston,	
  MA	
   	
  

Holiday	
  Inn	
  
Express,	
  
Manhattan,	
  
NY	
  

Hyatt,	
  
Union	
  
Square,	
  NY	
  

Courtyard,	
   	
  
San	
  Diego,	
  
CA	
  

Residence	
  
Inn,	
   	
  
Coconut	
  
Grove,	
  FL	
  

Hotel	
  Milo,	
   	
  
Santa	
  
Barbara,	
  CA	
   	
  

Hilton	
  
Garden	
  Inn,	
   	
  
Midtown	
  
East,	
  NY	
  

	
   (26,639)	
  	
   8,095	
  	
  

	
   35,141	
  	
   	
  

	
   -‐	
  

	
   3,874	
  	
  	
   8,095	
  	
  

	
   39,015	
  	
  	
   47,110	
  	
  	
  

	
   (4,318)	
  

	
   42,792	
  	
  04/15/11	
  

	
   (30,000)	
  

13,489	
  	
  

	
   27,025	
  	
   	
  

	
   -‐	
  

	
   4,531	
  	
  

13,489	
  	
  

	
   31,556	
  	
  	
   45,045	
  	
  	
  

	
   (3,142)	
  

	
   41,903	
  	
  05/19/11	
  

11,384	
  	
  

	
   23,432	
  	
   	
  

	
   -‐	
  

	
   480	
  	
  

11,384	
  	
  

	
   23,912	
  	
  	
   35,296	
  	
  	
  

	
   (295)	
  

	
   35,001	
  	
  07/22/11	
  

	
   (60,000)	
  

35,699	
  	
  

	
   55,805	
  	
   	
  

	
   -‐	
  

	
   22,163	
  	
  

35,699	
  	
  

	
   77,968	
  	
  

113,667	
  	
  	
  

	
   (5,080)	
  

	
   108,587	
  	
  11/16/11	
  

	
  	
   7,108	
  	
  

	
   29,556	
  	
   	
  

	
   -‐	
  

	
   13,661	
  	
  	
   7,108	
  	
  

	
   43,217	
  	
  	
   50,325	
  	
  	
  

	
   (4,819)	
  

	
   45,506	
  	
  03/01/12	
  

	
  	
   1,456	
  	
  

	
   14,954	
  	
   	
  

	
   -‐	
  

	
   1,448	
  	
  	
   1,456	
  	
  

	
   16,402	
  	
  	
   17,858	
  	
  	
  

	
   (1,338)	
  

	
   16,520	
  	
  05/07/12	
  

30,329	
  	
  

	
   57,016	
  	
   	
  

	
   -‐	
  

	
   731	
  	
  

30,329	
  	
  

	
   57,747	
  	
  	
   88,076	
  	
  	
  

	
   (3,805)	
  

	
   84,271	
  	
  06/18/12	
  

	
   (55,000)	
  

32,940	
  	
  

	
   79,300	
  	
   	
  

	
   -‐	
  

	
   759	
  	
  

32,940	
  	
  

	
   80,059	
  	
  

112,999	
  	
  	
  

	
   (3,499)	
  

	
   109,500	
  	
  04/09/13	
  

15,656	
  	
  

	
   51,674	
  	
   	
  

	
   -‐	
  

	
   274	
  	
  

15,656	
  	
  

	
   51,948	
  	
  	
   67,604	
  	
  	
  

	
   (2,061)	
  

	
   65,543	
  	
  05/30/13	
  

	
  	
   4,146	
  	
  

	
   17,456	
  	
   	
  

	
   -‐	
  

	
   5,107	
  	
  	
   4,146	
  	
  

	
   22,563	
  	
  	
   26,709	
  	
  	
  

	
   (953)	
  

	
   25,756	
  	
  06/12/13	
  

	
   (24,577)	
  

	
   -‐	
  

	
   55,080	
  	
   	
  

	
   -‐	
  

	
   193	
  	
  

	
   -‐	
  

	
   55,273	
  	
  	
   55,273	
  	
  	
  

	
   (1,156)	
  

	
   54,117	
  	
  02/28/14	
  

	
   (45,000)	
  

45,480	
  	
  

	
   60,762	
  	
   	
  

	
   -‐	
  

	
   21	
  	
  

45,480	
  	
  

	
   60,783	
  	
  

106,263	
  	
  	
  

	
   (908)	
  

	
   105,355	
  	
  05/27/14	
  

(1)	
   	
   	
   	
   	
   	
   	
   	
   Costs	
  capitalized	
  subsequent	
  to	
  acquisition	
  include	
  reductions	
  of	
  asset	
  value	
  due	
  to	
  impairment.	
  

90 

	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
  	
  
	
   	
  
	
  	
  
	
  	
  
	
   	
  
	
  	
  
	
  	
  
	
  	
  
	
  
hersha hospitality trust and subsidiaries 
schedule iii – real estate and accumulated depreciation as of december 31, 2014 
[in thousands]	
  

Initial	
  Costs	
  

Costs	
  Capitalized	
  
Subsequent	
  to	
  
Acquisition	
  

Gross	
  Amounts	
  at	
  
which	
  Carrried	
  at	
  
Close	
  of	
  Period	
  

Accumulated	
  
Depreciation	
   	
  

Net	
  Book	
  
Value	
  

Description	
   	
   Encumbrances	
  	
   Land	
  

Buildings	
  &	
   	
   	
   	
   	
  
Improvements	
  	
  Land	
  	
  

Buildings	
  &	
   	
   	
  

Improvements	
  	
   Land	
  

Buildings	
  &	
   	
   	
  
Improvements	
  	
  

Total	
  

Buildings	
  &	
  
Improvements*	
  	
  

Land,	
  Buildings	
  
&	
  
Improvements	
  

Date	
  of	
  
Acquisition	
  

Parrot	
  Key	
  
Hotel,	
  
Key	
  West,	
  
FL	
  

Winter	
  
Haven	
  
Hotel,	
  
Miami	
  
Beach,	
  FL	
  

Blue	
  Moon	
  
Hotel,	
  
Miami	
  
Beach,	
  FL	
  

Total	
  
Investment	
  
in	
  Real	
  
Estate	
  

$	
  

	
   -‐	
  

	
  	
   57,889	
  	
  	
  

	
   33,959	
  	
  	
  

	
   -‐	
  	
  

	
   54	
  	
  	
  	
   57,889	
  	
  	
  

	
   34,014	
  	
  	
  

	
   91,903	
  	
  	
  

	
   (555)	
  	
  

	
   91,348	
  	
   05/07/14	
  

	
   -‐	
  

	
   	
   5,400	
  	
  	
  

	
   18,147	
  	
  	
  

	
   -‐	
  	
  

	
   110	
  	
  	
   	
   5,400	
  	
  	
  

	
   18,258	
  	
  	
  

	
   23,658	
  	
  	
  

	
   (477)	
  	
  

	
   23,181	
  	
   12/20/13	
  

	
   -‐	
  

	
   	
   4,874	
  	
  	
  

	
   20,354	
  	
  	
  

	
   -‐	
  	
  

	
   127	
  	
  	
   	
   4,873	
  	
  	
  

	
   20,482	
  	
  	
  

	
   25,354	
  	
  	
  

	
   (498)	
  	
  

	
   24,856	
  	
   12/20/13	
  

	
   (563,079)	
  	
  

439,540	
  	
  	
  

	
   1,312,189	
  	
  	
  

	
   -‐	
  	
  

	
   112,653	
  	
  	
  

439,540	
  	
  	
   	
   1,424,842	
  	
   	
  

1,864,382	
  	
  	
  

($189,889)	
  	
  

	
   1,674,493	
  	
  	
  

*	
  

Assets	
  are	
  depreciated	
  over	
  a	
  7	
  to	
  40	
  year	
  life,	
  upon	
  which	
  the	
  latest	
  income	
  statement	
  is	
  computed	
  

The	
  aggregate	
  cost	
  of	
  land,	
  buildings	
  and	
  improvements	
  for	
  Federal	
  income	
  tax	
  purposes	
  for	
  the	
  years	
  ended	
  
December	
  31,	
  2014,	
  2013	
  and	
  2012	
  is	
  approximately	
  $1,836,861,	
  $1,575,555,	
  and	
  $1,278,318	
  respectively.	
  

Depreciation	
  is	
  computed	
  for	
  buildings	
  and	
  improvements	
  using	
  a	
  useful	
  life	
  for	
  these	
  assets	
  of	
  7	
  to	
  40	
  years.	
  

See	
  Accompanying	
  Report	
  of	
  Independent	
  Registered	
  Public	
  Accounting	
  Firm	
  

2014	
  

2013	
  

2012	
  

Reconciliation	
  of	
  Real	
  Estate	
  
Balance	
  at	
  beginning	
  of	
  year	
  
Additions	
  during	
  the	
  year	
  
Dispositions/Deconsolidation	
  of	
  consolidated	
  joint	
  venture	
  during	
  
the	
  year	
  
Changes/Impairments	
  in	
  Assets	
  Held	
  for	
  Sale	
   	
  
Total	
  Real	
  Estate	
  

	
   $	
   	
   1,629,312	
  	
   $	
   	
   1,520,151	
  	
   $	
   	
   1,481,433	
  
	
   167,916	
  

	
   333,889	
  	
  

	
   275,032	
  	
  

	
   (98,819)	
  	
  
	
   -‐	
  	
  

	
   (127,992)	
  
	
   (1,206)	
  
	
   $	
   	
   1,864,382	
  	
   $	
   	
   1,629,312	
  	
   $	
   	
   1,520,151	
  

	
   (156,504)	
  	
  
	
   (9,367)	
  	
  

Reconciliation	
  of	
  Accumulated	
  Depreciation	
  
Balance	
  at	
  beginning	
  of	
  year	
  
Depreciation	
  for	
  year	
  
Changes/Impairments	
  in	
  Assets	
  Held	
  for	
  Sale	
   	
  
Accumulated	
  depreciation	
  on	
  assets	
  sold	
  
Balance	
  at	
  the	
  end	
  of	
  year	
  

	
   $	
  

	
   162,189	
  	
   $	
  

	
   150,353	
  	
   $	
  

	
   43,218	
  	
  
	
   -‐	
  	
  
	
   (15,518)	
  	
  
	
   189,889	
  	
   $	
  

	
   39,771	
  	
  
	
   51	
  	
  
	
   (27,986)	
  	
  
	
   162,189	
  	
   $	
  

	
   $	
  

	
   139,057	
  
	
   35,597	
  
	
   -‐	
  
	
   (24,301)	
  
	
   150,353	
  

91 

	
  
	
   	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
  
	
   	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
   	
   	
  
annual report 2014 

Item	
  9.	
  

Changes	
  in	
  and	
  Disagreements	
  with	
  Accountants	
  on	
  Accounting	
  and	
  Financial	
  
Disclosure	
  

None.	
  

Item	
  9A.	
  

Controls	
  and	
  Procedures	
  

EVALUATION	
  OF	
  DISCLOSURE	
  CONTROLS	
  AND	
  PROCEDURES	
  

Under	
  the	
  supervision	
  and	
  with	
  the	
  participation	
  of	
  our	
  management,	
  including	
  our	
  Chief	
  Executive	
  Officer	
  

and	
  Chief	
  Financial	
  Officer,	
  we	
  conducted	
  an	
  evaluation	
  of	
  our	
  disclosure	
  controls	
  and	
  procedures,	
  as	
  such	
  term	
  is	
  
defined	
  under	
  Rule	
  13a-‐15(e)	
  promulgated	
  under	
  the	
  Securities	
  Exchange	
  Act	
  of	
  1934,	
  as	
  amended	
  (the	
  Exchange	
  
Act),	
  as	
  of	
  the	
  end	
  of	
  the	
  period	
  covered	
  by	
  this	
  report.	
  Based	
  on	
  that	
  evaluation,	
  the	
  Chief	
  Executive	
  Officer	
  and	
  
Chief	
  Financial	
  Officer	
  concluded	
  that	
  our	
  disclosure	
  controls	
  and	
  procedures	
  as	
  of	
  the	
  end	
  of	
  the	
  period	
  covered	
  
by	
  this	
  report	
  are	
  functioning	
  effectively	
  to	
  provide	
  reasonable	
  assurance	
  that	
  the	
  information	
  required	
  to	
  be	
  
disclosed	
  by	
  us	
  in	
  reports	
  filed	
  under	
  the	
  Securities	
  Exchange	
  Act	
  of	
  1934	
  is	
  (i)	
  recorded,	
  processed,	
  summarized	
  
and	
  reported	
  within	
  the	
  time	
  periods	
  specified	
  in	
  the	
  SEC’s	
  rules	
  and	
  forms	
  and	
  (ii)	
  accumulated	
  and	
  
communicated	
  to	
  our	
  management,	
  including	
  the	
  Chief	
  Executive	
  Officer	
  and	
  Chief	
  Financial	
  Officer,	
  as	
  appropriate	
  
to	
  allow	
  timely	
  decisions	
  regarding	
  disclosure.	
  A	
  control	
  system	
  cannot	
  provide	
  absolute	
  assurance,	
  however,	
  that	
  
the	
  objectives	
  of	
  the	
  controls	
  system	
  are	
  met,	
  and	
  no	
  evaluation	
  of	
  controls	
  can	
  provide	
  absolute	
  assurance	
  that	
  all	
  
control	
  issues	
  and	
  instances	
  of	
  fraud,	
  if	
  any,	
  within	
  a	
  company	
  have	
  been	
  detected.	
  

MANAGEMENT’S	
  ANNUAL	
  REPORT	
  ON	
  INTERNAL	
  CONTROL	
  OVER	
  FINANCIAL	
  REPORTING	
  

The	
  Company’s	
  management	
  is	
  responsible	
  for	
  establishing	
  and	
  maintaining	
  adequate	
  internal	
  control	
  

over	
  financial	
  reporting,	
  as	
  defined	
  within	
  Exchange	
  Act	
  Rules	
  13a-‐15(f)	
  and	
  15d-‐15(f).	
  Internal	
  control	
  over	
  
financial	
  reporting	
  refers	
  to	
  the	
  processes	
  designed	
  to	
  provide	
  reasonable	
  assurance	
  regarding	
  the	
  reliability	
  of	
  
financial	
  reporting	
  and	
  the	
  preparation	
  of	
  financial	
  statements	
  for	
  external	
  purposes	
  in	
  accordance	
  with	
  generally	
  
accepted	
  accounting	
  principles,	
  and	
  includes	
  policies	
  and	
  procedures	
  that:	
  

•	
  

•	
  

•	
  

pertain	
   to	
   the	
   maintenance	
   of	
   records	
   that,	
   in	
   reasonable	
   detail,	
   accurately	
   and	
   fairly	
   reflect	
   the	
  
transactions	
  and	
  dispositions	
  of	
  the	
  assets	
  of	
  the	
  Company;	
  
provide	
  reasonable	
  assurance	
  that	
  transactions	
  are	
  recorded	
  as	
  necessary	
  to	
  permit	
  preparation	
  of	
  financial	
  
statements	
  in	
  accordance	
  with	
  generally	
  accepted	
  accounting	
  principles,	
  and	
  that	
  receipts	
  and	
  expenditures	
  
of	
  the	
  Company	
  are	
  being	
  made	
  only	
  in	
  accordance	
  with	
  authorizations	
  of	
  management	
  and	
  directors	
  of	
  the	
  
Company;	
  and	
  
provide	
  reasonable	
  assurance	
  regarding	
  prevention	
  or	
  timely	
  detection	
  of	
  unauthorized	
  acquisition,	
  use,	
  or	
  
disposition	
  of	
  the	
  Company’s	
  assets	
  that	
  could	
  have	
  a	
  material	
  effect	
  on	
  the	
  financial	
  statements.	
  

Because	
  of	
  its	
  inherent	
  limitations,	
  internal	
  control	
  over	
  financial	
  reporting	
  may	
  not	
  prevent	
  or	
  detect	
  
misstatements.	
  Also,	
  projections	
  of	
  any	
  evaluation	
  of	
  effectiveness	
  to	
  future	
  periods	
  are	
  subject	
  to	
  the	
  risk	
  that	
  
controls	
  may	
  become	
  inadequate	
  because	
  of	
  changes	
  in	
  conditions,	
  or	
  that	
  the	
  degree	
  of	
  compliance	
  with	
  the	
  
policies	
  or	
  procedures	
  may	
  deteriorate.	
  

Management	
  conducted	
  an	
  evaluation	
  of	
  the	
  effectiveness	
  of	
  the	
  Company’s	
  internal	
  control	
  over	
  
financial	
  reporting	
  based	
  on	
  the	
  criteria	
  contained	
  in	
  Internal	
  Control	
  —	
  Integrated	
  Framework	
  (2013)	
  issued	
  by	
  the	
  
Committee	
  of	
  Sponsoring	
  Organizations	
  (COSO)	
  of	
  the	
  Treadway	
  Commission	
  as	
  of	
  December	
  31,	
  2014.	
  Based	
  on	
  
that	
  evaluation,	
  management	
  has	
  concluded	
  that,	
  as	
  of	
  December	
  31,	
  2014,	
  the	
  Company’s	
  internal	
  control	
  over	
  
financial	
  reporting	
  was	
  effective	
  based	
  on	
  those	
  criteria.	
  The	
  effectiveness	
  of	
  our	
  internal	
  control	
  over	
  financial	
  
reporting	
  as	
  of	
  December	
  31,	
  2014	
  has	
  been	
  audited	
  by	
  KPMG	
  LLP,	
  an	
  independent	
  registered	
  public	
  accounting	
  
firm,	
  as	
  stated	
  in	
  their	
  attestation	
  report	
  which	
  is	
  included	
  herein.	
  

92 

	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
hersha hospitality trust	
  

Report	
  of	
  Independent	
  Registered	
  Public	
  Accounting	
  Firm	
  

The	
  Board	
  of	
  Trustees	
  and	
  Shareholders	
  of	
  
Hersha	
  Hospitality	
  Trust:	
  

We	
  have	
  audited	
  Hersha	
  Hospitality	
  Trust	
  and	
  subsidiaries’	
  internal	
  control	
  over	
  financial	
  reporting	
  as	
  of	
  December	
  
31,	
  2014,	
  based	
  on	
  criteria	
  established	
  in	
  Internal	
  Control	
  -‐	
  Integrated	
  Framework	
  (2013)	
  issued	
  by	
  the	
  Committee	
  
of	
  Sponsoring	
  Organizations	
  of	
  the	
  Treadway	
  Commission	
  (COSO).	
  Hersha	
  Hospitality	
  Trust's	
  management	
  is	
  
responsible	
  for	
  maintaining	
  effective	
  internal	
  control	
  over	
  financial	
  reporting	
  and	
  for	
  its	
  assessment	
  of	
  the	
  
effectiveness	
  of	
  internal	
  control	
  over	
  financial	
  reporting,	
  included	
  in	
  the	
  accompanying	
  Management’s	
  Annual	
  
Report	
  on	
  Internal	
  Control	
  Over	
  Financial	
  Reporting.	
  Our	
  responsibility	
  is	
  to	
  express	
  an	
  opinion	
  on	
  the	
  Company’s	
  
internal	
  control	
  over	
  financial	
  reporting	
  based	
  on	
  our	
  audit.	
  

We	
  conducted	
  our	
  audit	
  in	
  accordance	
  with	
  the	
  standards	
  of	
  the	
  Public	
  Company	
  Accounting	
  Oversight	
  Board	
  
(United	
  States).	
  Those	
  standards	
  require	
  that	
  we	
  plan	
  and	
  perform	
  the	
  audit	
  to	
  obtain	
  reasonable	
  assurance	
  about	
  
whether	
  effective	
  internal	
  control	
  over	
  financial	
  reporting	
  was	
  maintained	
  in	
  all	
  material	
  respects.	
  Our	
  audit	
  
included	
  obtaining	
  an	
  understanding	
  of	
  internal	
  control	
  over	
  financial	
  reporting,	
  assessing	
  the	
  risk	
  that	
  a	
  material	
  
weakness	
  exists,	
  and	
  testing	
  and	
  evaluating	
  the	
  design	
  and	
  operating	
  effectiveness	
  of	
  internal	
  control	
  based	
  on	
  the	
  
assessed	
  risk.	
  Our	
  audit	
  also	
  included	
  performing	
  such	
  other	
  procedures	
  as	
  we	
  considered	
  necessary	
  in	
  the	
  
circumstances.	
  We	
  believe	
  that	
  our	
  audit	
  provides	
  a	
  reasonable	
  basis	
  for	
  our	
  opinion.	
  

A	
  company's	
  internal	
  control	
  over	
  financial	
  reporting	
  is	
  a	
  process	
  designed	
  to	
  provide	
  reasonable	
  assurance	
  
regarding	
  the	
  reliability	
  of	
  financial	
  reporting	
  and	
  the	
  preparation	
  of	
  financial	
  statements	
  for	
  external	
  purposes	
  in	
  
accordance	
  with	
  generally	
  accepted	
  accounting	
  principles.	
  	
  A	
  company's	
  internal	
  control	
  over	
  financial	
  reporting	
  
includes	
  those	
  policies	
  and	
  procedures	
  that	
  (1)	
  pertain	
  to	
  the	
  maintenance	
  of	
  records	
  that,	
  in	
  reasonable	
  detail,	
  
accurately	
  and	
  fairly	
  reflect	
  the	
  transactions	
  and	
  dispositions	
  of	
  the	
  assets	
  of	
  the	
  company;	
  (2)	
  provide	
  reasonable	
  
assurance	
  that	
  transactions	
  are	
  recorded	
  as	
  necessary	
  to	
  permit	
  preparation	
  of	
  financial	
  statements	
  in	
  accordance	
  
with	
  generally	
  accepted	
  accounting	
  principles,	
  and	
  that	
  receipts	
  and	
  expenditures	
  of	
  the	
  company	
  are	
  being	
  made	
  
only	
  in	
  accordance	
  with	
  authorizations	
  of	
  management	
  and	
  directors	
  of	
  the	
  company;	
  and	
  (3)	
  provide	
  reasonable	
  
assurance	
  regarding	
  prevention	
  or	
  timely	
  detection	
  of	
  unauthorized	
  acquisition,	
  use,	
  or	
  disposition	
  of	
  the	
  
company’s	
  assets	
  that	
  could	
  have	
  a	
  material	
  effect	
  on	
  the	
  financial	
  statements.	
  

Because	
  of	
  its	
  inherent	
  limitations,	
  internal	
  control	
  over	
  financial	
  reporting	
  may	
  not	
  prevent	
  or	
  detect	
  
misstatements.	
  	
  Also,	
  projections	
  of	
  any	
  evaluation	
  of	
  effectiveness	
  to	
  future	
  periods	
  are	
  subject	
  to	
  the	
  risk	
  that	
  
controls	
  may	
  become	
  inadequate	
  because	
  of	
  changes	
  in	
  conditions,	
  or	
  that	
  the	
  degree	
  of	
  compliance	
  with	
  the	
  
policies	
  or	
  procedures	
  may	
  deteriorate.	
  

In	
  our	
  opinion,	
  Hersha	
  Hospitality	
  Trust	
  maintained,	
  in	
  all	
  material	
  respects,	
  effective	
  internal	
  control	
  over	
  financial	
  
reporting	
  as	
  of	
  December	
  31,	
  2014,	
  based	
  on	
  criteria	
  established	
  in	
  Internal	
  Control	
  -‐	
  Integrated	
  Framework	
  (2013)	
  
issued	
  by	
  the	
  Committee	
  of	
  Sponsoring	
  Organizations	
  of	
  the	
  Treadway	
  Commission	
  (COSO).	
  

We	
  also	
  have	
  audited,	
  in	
  accordance	
  with	
  the	
  standards	
  of	
  the	
  Public	
  Company	
  Accounting	
  Oversight	
  Board	
  
(United	
  States),	
  the	
  consolidated	
  balance	
  sheets	
  of	
  Hersha	
  Hospitality	
  Trust	
  as	
  of	
  December	
  31,	
  2014	
  and	
  2013,	
  
and	
  the	
  related	
  consolidated	
  statements	
  of	
  operations,	
  comprehensive	
  income,	
  equity,	
  and	
  cash	
  flows	
  for	
  each	
  of	
  
the	
  years	
  in	
  the	
  three-‐year	
  period	
  ended	
  December	
  31,	
  2014,	
  and	
  our	
  report	
  dated	
  February	
  20,	
  2015	
  expressed	
  
an	
  unqualified	
  opinion	
  on	
  those	
  consolidated	
  financial	
  statements.	
  

/s/	
  KPMG	
  LLP	
  

Philadelphia,	
  Pennsylvania	
  
February	
  20,	
  2015	
  

93 

	
  	
  
	
  	
  	
  
	
  
	
  
	
  
	
  	
  
	
  
	
  
	
  
	
  
	
  
annual report 2014 

CHANGES	
  IN	
  INTERNAL	
  CONTROL	
  OVER	
  FINANCIAL	
  REPORTING	
  

There	
  were	
  no	
  changes	
  in	
  our	
  internal	
  control	
  over	
  financial	
  reporting	
  during	
  the	
  quarter	
  ended	
  December	
  

31,	
  2014,	
  that	
  have	
  materially	
  affected,	
  or	
  are	
  reasonably	
  likely	
  to	
  materially	
  affect,	
  our	
  internal	
  control	
  over	
  
financial	
  reporting.	
   	
  

94 

	
  
2014 financial highlights

(In thousands, except per share data) 

consolidated hotel
operating results

2014

2013

2012

2011

2010

Year Ended December 31,

hotel operating revenues

average daily rate
occupancy
revenue per available room

$

$

$

417,226

338,064

299,005

229,156

184,998

187.82
82.6%
155.19

179.70
79.7%
143.30

175.23
78.6%
137.78

166.58
76.6%
127.64

157.11
76.7%
120.52

(In thousands, except per share data) 

hersha hospitality trust
operating data: (Excluding Impairment Charges) (1)

2014

2013

Year Ended December 31,

2012

2011

2010

$
Total Revenues (Including Discontinued Operations)                    
Net Income applicable to Common Shareholders
Adjusted EBITDA(2) (4)
Adjusted Funds from Operations (3) (4)

419,346 
54,638
162,506
102,832

396,458 
44,467
145,064
86,487

364,690 
8,376
143,291
76,046

329,868 
)
(5,133
132,969
68,710

283,597 
)
(18,871
108,329
52,067

per share data: (Excluding Impairment Charges) (1)
$
Basic/Diluted Earnings Per Common Share
AFFO
Distributions to Common Shareholders

0.27
0.49
0.26

0.22
0.41
0.24

0.04
0.38
0.24

)

(0.03
0.38
0.23

)

(0.14
0.36
0.20

balance sheet data: (as of December 31st)
Total Assets 
Total Debt 
Noncontrolling Interest in Partnership
Total Shareholder’s Equity

$

1,855,539
918,923
28,007
829,382

1,748,097
819,336
29,181
837,958

1,707,679
792,708
31,281
829,828

1,630,909
820,132
32,124
730,671

1,457,277
694,720
39,778
683,434

(1) Operating and Per Share Data exclude charges recorded during 2010-2014 relating to impairment losses on investment in unconsolidated joint ventures and assets
held for sale.

(2) Adjusted Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA) is a non-GAAP financial measure within the meaning of the Securities and
Exchange Commission rules. Our interpretation of Adjusted EBITDA is that EBITDA derived from our investment in unconsolidated joint ventures should be added back to
net income (loss) as part of reconciling net income (loss) to Adjusted EBITDA. Our Adjusted EBITDA computation may not be comparable to EBITDA or Adjusted EBITDA 
reported by other companies that interpret the definition of EBITDA differently than we do. Management believes Adjusted EBITDA to be a meaningful measure of a REIT's
performance because it is widely followed by industry analysts, lenders and investors and that it should be considered along with, but not as an alternative to, net income,
cash flow, FFO and AFFO as a measure of the company's operating performance.

(3) Funds from Operations (FFO) as defined by NAREIT represents net income (loss) (computed in accordance with generally accepted accounting principles), excluding
extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated assets, plus certain non-cash items, such as loss from impairment of
assets and depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  We present Adjusted Funds From Operations (AFFO),
which reflects FFO in accordance with the NAREIT definition plus the following additional adjustments: adding back write-offs of deferred financing costs on debt
extinguishment, both for consolidated and unconsolidated properties, adding back amortization of deferred financing costs, adding back non-cash stock expense, adding
back acquisition and terminated transaction expenses, adding back preferred share extinguishment costs, adding back prior period tax assessment expenses, adding back
FFO attributed to our partners in consolidated joint ventures, and making adjustments to ground lease payments, which are required by GAAP to be amortized on a
straight-line basis over the term of the lease, to reflect the actual lease payment. 

(4) In these financial highlights and in the Letter to Shareholders from our Chief Executive Officer and our President and Chief Operating Officer that follows, we present
non-GAAP financial measures, including EBITDA, Adjusted EBITDA, hotel EBITDA, FFO and AFFO.  We have provided reconciliations of these non-GAAP financial measures to
the applicable GAAP measures in the appendix section that follows the letter to our shareholders, in portions of our Annual Report on Form 10-K for the year ended 
December 31, 2014, which accompanies this Letter or can be viewed at www.hersha.com, under “Item 7 Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” Because hotel EBITDA is specific to individual hotels or groups of hotels and not to our Company as a whole, it is not directly comparable to any
GAAP measure and should not be relied on as a measure of performance for our portfolio of hotels taken as a whole.

HERSHA

hersha hospitality trust

corporate headquarters
44 Hersha Drive
Harrisburg, PA 17102
Telephone: (717) 236-4400
Fax: (717) 774-7383

executive offices
One Washington Square
510 Walnut Street, 9th Floor
Philadelphia, PA 19106
Telephone: (215) 238-1046
Fax: (215) 238-0157

corporate/securities counsel
Hunton & Williams LLP

independent auditors
KPMG LLP

registrar & stock 
transfer agent
American Stock Transfer & Trust Company

common stock information
The Common Stock of Hersha Hospitality Trust 
is traded on The New York Stock Exchange 
under the Symbol “HT”.

management certifications
The Company’s Chief Executive Officer and Chief Financial
Officer provided certifications to the Securities and
Exchange Commission as required by Section 302 of the
Sarbanes-Oxley Act of 2002 and these certifications are
included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2014.  In addition, as required
by Section 303A.12(a) of The New York Stock Exchange
(NYSE) Listed Company Manual, on June 22, 2014, the
Company’s Chief Executive Officer submitted to the NYSE
the annual CEO certification regarding the Company’s
compliance with the NYSE’s corporate governance listing
standards.

annual report on form 10-k
Shareholders may obtain a copy of the Company’s Annual
Report on Form 10-K as filed with the Securities and 
Exchange Commission free of charge (except for exhibits), 
by writing to the Company’s Chief Financial Officer, Hersha 
Hospitality Trust, 44 Hersha Drive, Harrisburg, PA; or, visit
the Company’s website at www.hersha.com and refer to 
the Company’s SEC Filings.

annual meeting
The annual meeting of shareholders of Hersha Hospitality
Trust will be held at 9:00 A.M. (EDT) on Thursday, May 21,
2015 at One Washington Square, 510 Walnut Street, 9th
Floor, Philadelphia, PA 19106.

board of trustees

Hasu P. Shah
Chairman, 
Hersha Hospitality Trust

Jay H. Shah
Chief Executive Officer, 
Hersha Hospitality Trust

Donald J. Landry
Lead Director, Hersha Hospitality Trust
Former President & CEO, Sunburst Hospitality Inc.

Michael A. Leven
Former President and Chief Operating Officer,
Las Vegas Sands Corp.

Thomas J. Hutchison III
Former CEO, 
CNL Hotels & Resorts 
and CNL Retirement Properties, Inc.

Dianna F. Morgan
Former Senior Vice President,
Walt Disney World Co.

John M. Sabin
Executive Vice President and CFO, 
Revolution LLC. and Case Foundation

management team

Jay H. Shah
Chief Executive Officer

Neil H. Shah
President and Chief Operating Officer

Ashish R. Parikh
Chief Financial Officer

Michael R. Gillespie
Chief Accounting Officer

David L. Desfor
Treasurer and Corporate Secretary

William J. Walsh
Senior Vice President of Asset Management

Robert C. Hazard III
Senior Vice President of Acquisitions and Development

Bennett Thomas
Vice President of Finance and Sustainability

HERSHA

hersha hospitality trust

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www.hersha.com

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